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Markets

Yuan inches higher as new virus infections in China fall to near 2-week low

The People's Bank of China set the midpoint rate - which spot can trade 2pc either side of - at 6.9718 per dollar p
12 Feb 2020
  • The People's Bank of China set the midpoint rate - which spot can trade 2pc either side of - at 6.9718 per dollar prior to market open.
  • The yuan was also helped by the U.S. dollar giving up some gains, OCBC Wing Hang Bank said on Wednesday.
  • The offshore yuan was trading 0.13pc stronger at 6.9631 per dollar at midday.

HONG KONG: The yuan edged up on Wednesday as China reported the slowest daily growth of coronavirus infections in nearly two weeks, raising hopes the outbreak may be peaking and that damage to the economy may be fleeting.

New confirmed cases in mainland China - at 2,015 on Tuesday - fell to their lowest in almost two weeks, the National Health Commission said on Wednesday. New cases in epicentre Hubei province also hit Jan. 31 lows.

Zhong Nanshan, Beijing's senior medical adviser, told Reuters that the outbreak is hitting a peak in China this month and may end by April, basing the forecast on mathematical modelling, recent events and government action.

At midday, the onshore yuan firmed 0.05pc to 6.9624 per dollar.

The People's Bank of China set the midpoint rate - which spot can trade 2pc either side of - at 6.9718 per dollar prior to market open, almost the same as the Reuters' estimate.

"Dr Zhong's latest assessment of the coronavirus epidemic is expected to sustain a risk friendly mood and prop up EM Asian currencies," strategists at Scotiabank said in a note. They said the yuan could strengthen further towards 6.9 per dollar.

The yuan was also helped by the U.S. dollar giving up some gains, OCBC Wing Hang Bank said on Wednesday.

The dollar index was flat in Asia hours after falling 0.1pc on Tuesday. It previously benefited from concerns over the coronavirus.

If the spread of the virus has been contained, and more migrant workers are able to get back to factories soon, the economic hit will be felt mainly in the first quarter, possibly cutting growth by two percentage points or more from 6pc in the last quarter, economists have said. But demand could bounce back in coming months.

Comments by a White House official on Tuesday that the virus outbreak could reduce Chinese purchases of U.S. agricultural products - a key part of their Phase-1 trade deal - failed to dampen sentiment.

"Risk appetite is recovering. Everybody is betting there is little room for renminbi depreciation amid the recent U.S.-China exchange rate accord," one of the traders, based in Beijing, said of China's commitment to keep the yuan stable.

Separately, the PBOC will sell 30 billion yuan($4.31 billion) of offshore bills in Hong Kong on Thursday.

The offshore yuan was trading 0.13pc stronger at 6.9631 per dollar at midday.

The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 93.49, slightly firmer than the previous day's 93.43.