Aussie, Kiwi, & Yuan Fall
The Aussie and New Zealand dollars fell against their U.S. counterpart on forex trading on Monday. Growing fears of a second wave of the coronavirus in Beijing prompted investors to sell currencies sensitive to risk.
The Chinese yuan also dipped in offshore trade after Beijing recorded dozens of new cases of the novel coronavirus recently. They are all being linked to a major wholesale food market.
Meanwhile, the British pound declined against the U.S. dollar. This is due to concerns that trade negotiations between Britain and the European Union are not making enough progress.
Forex traders are also monitoring a spike in coronavirus cases in the United States. Worries are increasing that another outbreak could inflict greater damage on the global economy.
FX news reported that hedge funds and other short-term speculators came into the market early to sell the Australian dollar. That’s because of the new infections in Beijing, said Yukio Ishizuki, foreign exchange strategist at Daiwa Securities in Tokyo.
Hopefully, this will not be a big outbreak, and this downward move will not last long, Ishizuki added.
The Australian dollar fell 0.36% to $0.6828 and the New Zealand dollar fell 0.43% to $0.6420.
Both of these currencies trade as liquid proxies for risk sentiment. This is because of their close ties to China’s economy and global commodities.
In the European forex, the Sterling lost 0.2% to trade at $1.2514 with the pound easing slightly to 89.95 pence per euro. The euro held steady at $1.1254.
Onshore and Offshore Yuan
In Beijing, testing is ramping up after a cluster of new coronavirus cases was confirmed at Xinfadi. It is said to be the largest food market in Asia.
China’s capital had gone for almost two months with few infections until a new case was reported on June 12. Since then, the total number has already climbed to 51.
Several states have also reported a record increase in new coronavirus cases and hospitalizations in the U.S. However, officials continued with plans to reopen their economies.
Global economies have only just regained footing after the pandemic slammed the breaks on business activity.
Another large outbreak could disrupt FX markets again which had been rallying recently on hopes for economic recovery.
The onshore yuan was little changed at 7.0882 per dollar while offshore, the yuan fell to 7.0865. This highlights the sense of concern about the outlook.
The yuan did not move after data showed Chinese industrial production and retail sales missed economists estimates in May.
