Yen gains, yuan and Aussie dollar slip as China virus fears return
The yen rose from a three-week low against the dollar on Thursday after China’s Hubei province, the epicenter of a coronavirus outbreak, reported a sharp jump in the number of new cases in a jolt to markets and sparking a flight for safe-haven assets.
The Chinese yuan slipped against the dollar as the latest update on the spread of the virus provided a grim reminder to investors that the epidemic remains a potent threat to the global economic outlook.
Hubei on Thursday reported 14,840 new cases as of Feb. 12, up from 1,638 new cases on Tuesday, with the number of deaths in the province rising a sharp 242 to 1,310.
Hubei’s health commission said it started including cases diagnosed with a new method. Uncertainty about the virus, which emerged in Hubei’s capital Wuhan late last year and has spread to 24 other countries, has shaken up markets over the past weeks.
“When you see numbers like this, you can’t help but move to risk-off trades, which means buy the yen and sell stocks,” said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank in Tokyo.
“If the authorities can reasonably explain this, things might calm down, but I expect risk aversion to continue.”
The yen JPY=EBS rose 0.15% on Thursday to 109.94 yen, pulling back from its weakest since Jan. 21.
Both Australian and New Zealand have extensive trade ties with China, with trade in commodities, tourism and education especially vulnerable to disruption from the virus.
The New Zealand dollar had enjoyed a lift the previous day when the central bank dropped a reference to the chance of future rate cuts in its policy review. Earlier on Thursday, an assistant governor told Reuters the central bank has a “genuine neutral bias” amid improving domestic demand, but is open to reviewing that position if the economic hit from the coronavirus epidemic worsened.
The World Health Organization has likened the epidemic’s threat to terrorism, underscoring the anxiety in financial markets about its impact across businesses and trade worldwide.
Chinese policymakers have implemented a raft of measures to support the economy as fears grow the coronavirus outbreak could have a damaging impact on growth in the Asian giant and globally.
Elsewhere in currencies, the dollar EUR=EBS traded at $1.0872 per euro, close to its strongest level in more than two years due to growing optimism about the health of the U.S. economy.
Sentiment for the greenback has turned positive since data last week showed the U.S. labor market is improving.
In contrast, the euro wilted on Wednesday after data showed euro zone manufacturing output plunged more than expected in December, boding ill for fourth quarter euro zone gross domestic product data due on Friday.
The euro EURGBP=D3 changed hands at 83.92 pence on Thursday in Asia, close to its lowest since Dec. 17.
The pound GBP=D3 was little changed at $1.2954.
Cable has managed to inch away from 2-1/2-month lows hit at the start of the week due to encouraging economic data, but investors remain anxious over British Prime Minister Boris Johnson’s hard line in trade talks with the European Union.