Yen Strengthens, Yuan Weakens As Coronavirus Spreads
On Wednesday, the yen buoyed while the yuan was on retreat after the forex trading. This happened after investors tried to evaluate the risk of the occurrence of a new coronavirus in China.
The issue has been upsetting the country’s economy and trade partners.
Moreover, the virus triggers a type of pneumonia. It has already circulated to cities containing Beijing and Shanghai as the figure of patients in China is more than tripled.
Other cases were also reported beyond China, including the United States.
Meanwhile, the U.S. dollar fell to 109.86 yen from Tuesday’s high of 110.23 versus the yen in the foreign exchange market.
On Tuesday, the offshore yuan dropped 0.6%. In more than a month, it was the most significant fall recorded. The currency also last stood at 6.9100 yuan per dollar.
The Australian dollar, which is frequently as a substitute bet on the Chinese economy, raised $0.6844. It was nearly the lowest possible level in 10 weeks.
In a news report, the coronavirus induced memories of the 2002-2003 outbreak of Severe Acute Respiratory Syndrome (SARS).
The disease has killed just about 800 people worldwide and led to a sharp decline in tourism in Asia.
The Infection Had Insufficient Effect On Supply
In a statement, a director of currencies at Societe Generale in Tokyo, Kyosuke Suzuki, said, “The comparison individuals are making is with the SARS. Meanwhile, we still don’t know how the new disease will be, my sense at the moment is that markets are not taking it as dire as SARS.”
Suzuki added, “Back then, every firm was prohibiting travel to Hong Kong. We haven’t seen that kind of reaction yet,” he said.
On the other side, the head of Japan market research at JPMorgan, Tohru Sasaki, indicated that the virus had an inadequate impact on supply chains in Asia.
It is while the SARS outburst constantly affected a substantial economic downturn in Hong Kong and Singapore. The dilemma was for about eight weeks through a decline in tourism.
In a different statement, Sasaki said, “If the latest infection reaches a similar magnitude, some economies such as Thailand, Singapore, and Malaysia could be affected by a drop in tourism.”
To add, “But its long-term impact on the global economy and the currency market will be limited,” he said.
Elsewhere, the euro remained at $1.1083, after plunging slightly on Monday.
Moreover, Sterling traded at $1.3050. It has been earning a tad on Tuesday after data demonstrated the British economy established jobs at its most robust rate.
The matter occurred in nearly a year in the three months to November.
At the end of this month, the reliable data slightly undermined prospects of an interest rate cut. The possibility of a rate cut is by the Bank of England.
However, markets are still pricing in just about a 60% probability of a 0.25 percentage point cut.
