Yuan tumbles as spread of China virus unnerves markets
LONDON, Jan 21: China's yuan tumbled on Tuesday, pulling away from six-month highs against the dollar, while the yen rallied as the spread of a pneumonia-like virus in China sparked a sudden bout of risk aversion and rattled world markets.
China reported a fourth death from a new coronavirus as the number of cases continued to rise, just as hundreds of millions of Chinese prepared to travel for the Lunar New Year holiday.
Global stocks fell as the outbreak rekindled memories of the Severe Acute Respiratory Syndrome (SARS) in 2002/2003, another coronavirus which broke out in China and killed nearly 800 people in a global pandemic.
"You've got a stronger yen, a stronger Swiss franc and risk aversion is setting in across everything," said Kit Juckes, an analyst at Societe Generale.
"It would be very surprising if it was a trend-changer in terms of where things go from here, but it is early days."
In currency markets, the yuan bore the brunt of the jitters, tumbling almost 0.7per cent in offshore trading to 6.9126 per dollar CNH=D3, off six-month highs hit just on Monday. Onshore, the yuan hit its lowest in over a week at 6.9094 CNY=CFXS.
The moves rippled across Asia to currencies linked to Chinese trade and tourism, with the Australian dollar AUD=D3 shedding 0.4per cent to $0.68445, its lowest in over a month.
The New Zealand dollar NZD=D3 was down a third of a per cent at $0.6590, while the Korean won dropped 0.8per cent KRW=.
In contrast, the yen JPY=EBS firmed 0.2per cent to 109.97 per dollar as investors rushed for safe-haven assets such as the Japanese currency and US Treasuries US10YT=RR.
The Swiss franc too firmed a touch at 0.96800 to the dollar CHF=EBS.
The dollar index .DXY, which measures the greenback's value against a basket of six currencies, was steady at 97.602 - near the highest level in a month.
The euro and sterling softened against the dollar EUR=EBS GBP=D3, with focus turning to data later this session for latest clues on the economic outlook.
Europe's single currency traded at $1.10875. It was locked in a narrow range before Thursday's European Central Bank (ECB) meeting that is expected to launch a comprehensive review of central bank strategy, including the ECB's inflation target.
The scope and scale of the review will be a key focus, given the far-reaching implications for monetary policy.
A slightly brighter tone to data means the ECB's assessment of the economic outlook will also be watched closely.
Earlier on Tuesday, the Bank of Japan kept its short-term interest rate target at minus 0.1per cent and its pledge to guide 10-year government bond yields around zero. -Reuters