China’s yuan hit over virus worries

Denise Jackson

The Chinese yuan took a real hit in the foreign exchange markets on Tuesday and into Wednesday over concerns that a virus which has affected some Chinese people could cause economic growth in the country to stagnate.

The outbreak of a fresh coronavirus in the country is perceived by some to be a threat to the Chinese economy’s recovery, especially given that it is so fragile following the trade war China and the US have recently experienced.

It is understood that there are now significant numbers of patients with coronavirus in major Chinese cities, such as Shanghai.

The capital Beijing is also now affected, and overall it is believed that the patient tally in the whole country has gone up threefold.

There have also been some cases reported outside of the China, such as in the United States.

As a consequence of the developments, the onshore yuan, which is traded only in China and not on the international currency markets, was spotted down to its worst position for around five months.

In its pair against the US dollar, for example, it was spotted at 6.9063.

The Australian dollar, which is seen by many as being deeply interlinked with the fortunes of the Chinese economy due to the exporting relationship between the two countries, was down against the greenback to $0.6827 at one stage.

This was a level not spotted by the currency since the middle of last month.

Part of the reason for the fear around the outbreak of the virus lies in the fact that the area has been hit by similar problems in the past.

Back in 2002 and 2003, for example, a condition called Severe Acute Respiratory Syndrome (SARS) spread around southern China.

It claimed almost 800 victims around the world, but also had a knock-on effect for Asian tourism – and some traders are concerned that this outbreak could do something similar.

However, some analysts sounded a note of caution – especially given that there was little information to go off at first.

One analyst from JPMorgan’s market Japanese research department claimed that while China’s neighbours may end up being somewhat vulnerable due to the virus, there may in fact end up being quite limited effects on overall Asian supply chains.

As was to be expected, the safe haven currencies such as the Japanese yen did well out of the uncertainty.

It was seen up on the day, reaching 109.98 at one point.

Elsewhere, the pound was noted at $1.3040 in its pair against the US dollar.

It was revealed on Tuesday that more and more jobs were being created in Britain, and as of the three months leading up to November, this was happening at the best rate in almost 12 months.

The single European currency was seen hardly altered in its pair against the US dollar and was seen at $1.1083 at one point.

The euro will have to contend with a meeting of the European Central Bank, which is scheduled to happen later this week.

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Denise Jackson
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