China, Coronavirus, Australian dollar, and Bank of England

Let’s check the situation with the currencies. The Australian dollar dropped 0.5% to $0.6787; it reached its lowest since December 2. It is heavily exposed to the performance of China’s economy. The kiwi also lost 0.5%.

Due to low liquidity, traders said market moves could be exaggerated. It is because financial markets are closed for the holidays in Australia, Singapore, Hong Kong, and China.

The Japanese currency rose to as high as 108.73 yen. Nevertheless, yesterday it retraced much of its rise. It was last up to per dollar, just 0.1% at 109.12 yen.

Foreign exchange strategist at Daiwa Securities at Tokyo is Yukio Ishizuki. He said that the risk mood would continue for a while.

Nervous investors focused almost solely on China and the spreading virus. Thus, moves in other currencies were contained.

Ahead of the latest reading of a German business sentiment indicator, the euro nudged up slightly to $1.1032.

Yesterday the dollar index was flat at 97.857.

Against the dollar, the pound held at $1.3075. Last week’s positioning data showed investors slimming their net long position in the pound. On Thursday, a knife-edge Bank of England will decide whether or not to cut United Kingdom interest rates or not.

China: Yuan and Coronavirus

Per dollar, the offshore Chinese yuan shed 0.6% to 6.9783. Since December 31, the dollar was at its weakest.

The Australian dollar massively depends on Chinese economic performance.

The RCB Capital Market’s global head of FX strategy is Elsa Lignos. She said that some analysts argue that the fear will become stronger than reality with the coronavirus. She is pointing out the low rate of mortality. For example, no one is forecasting for Spanish flu to repeat. The bigger worry is the economic impact of containment and containment strategies, particularly in China, adds Elsa Lignos.

Hong-Kong has banned the entry for the visitors from China’s Hubei province. The coronavirus first outbreak came from the Hubei province.

As you see, the market’s focus is heavily on China and coronavirus.