FOREX-Yuan, commodity-linked currencies slide as Chinese virus toll rises

* Investors seek safety as cases of coronavirus rise

* Yuan hits three-week low, Aussie lowest since early

* Yen bounces but erases most of its early gains

* Graphic: World FX rates in 2019
(Adds details, new quote, latest prices)

LONDON, Jan 27 (Reuters) – China’s yuan tumbled to a 2020
low on Monday and commodity-linked currencies such as the
Australian dollar fell, as growing fears about the spread of a
coronavirus from China pushed investors into safer assets.

The yen was the main beneficiary, although its move higher
was limited. The Japanese currency touched its highest since
Jan. 8.

Health authorities around the world are working to prevent a
pandemic of the virus, which has killed more than 80 people in
China. Nearly 2,800 people have been infected globally. China’s
National Health Commission said on Sunday the ability of the
virus to spread was getting stronger.

China’s government announced it would extend the Lunar New
Year holidays to help prevent and control the virus.

Hong Kong has also banned the entry of people who have
visited the province of Hubei in the past 14 days. The outbreak
was first reported in Hubei.

RBC Capital Markets’ FX strategist Elsa Lignos said that
while some would argue that fears about the virus were overdone,
given the low mortality rate, “the bigger worry is the economic
impact of containment and quarantine strategies, particularly in

The offshore yuan shed more than 0.8% to 6.99 yuan per
dollar, its weakest since Dec. 30.

After rallying to a five-and-a-half month high earlier in
January, the yuan has gone into a tailspin. The dollar has
gained more than 2% versus the Chinese currency since last

The Australian dollar, which is exposed to the Chinese
economy, dropped 0.8% to $0.6771, its lowest since Dec.
2. The New Zealand dollar weakened 0.7%.

Traders said market moves could be exaggerated by low
liquidity. Financial markets in China, Hong Kong, Singapore, and
Australia are closed for holidays.

The yen rose as high as 108.73 yen but was last down 0.3% at
108.91 yen per dollar.

“Risk aversion is contagious, and coronavirus has infected
confidence across the board at the start of the week,” said Kit
Juckes, an analyst at Societe Generale.

The euro fell to a two-month low against the yen of 119.94
yen. 0.4% lower. It also lost ground to the Swiss
franc, slipping to a 33-month low of 1.0689 francs per euro

The euro erased its earlier gains against the dollar after
the Ifo institute said that German business morale deteriorated
unexpectedly in January. The euro was unchanged at $1.1026

The dollar index was flat at 97.849.

Sterling rose 0.2% to $1.3090. Positioning data
last week showed investors reducing their net long position in
the pound before a Bank of England decision on Thursday about
whether to cut UK interest rates.

(Reporting by Tommy Reggiori Wilkes;
editing by Toby Chopra, Larry King)

Be the first to comment

Leave a Reply

Your email address will not be published.