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Yen Slips and Aussie Firms as Traders Brace for China Reopening

Benjamin Purvis and Michael G. Wilson

(Bloomberg) -- Traders in the global currency market appeared to take some comfort from steps that China has taken to combat the market and economic fallout from the Wuhan coronavirus crisis, although moves remained muted as they braced for the reopening of Chinese markets following a break of more than a week.

The Australian dollar -- seen by many as a proxy for China and risk appetite -- recovered ground to trade up around 0.1% on the day after briefly dipping to a fresh four-month low. Havens such as the Japanese yen and the Swiss franc, meanwhile, edged lower, suggesting a marginally more sanguine outlook following the announcement of liquidity measures from the Chinese government. The moves remained small though as investors awaited the opening of China’s own markets later in the day and a clearer view on how much damage they might sustain amid growing concerns about the infection.

The Chinese government extended the already-scheduled lunar new year holiday through to the end of last week and Monday will be the first opportunity for investors in the country’s mainland markets to trade on recent developments. Ahead of that, the nation’s central bank announced that it would provide a liquidity injection of 150 billion yuan ($21.7 billion). And while that could provide some succor for global markets, it appears unlikely to prevent a major shift in Chinese assets.

Market Moves

The Australian dollar, regarded by many as a developed-market currency proxy for China and risk sentiment, fell as much as 0.2% to a four-month low of 66.82 U.S. cents in early Monday trading, before rebounding to trade as high as 67.02 cents. The currency declined more than 2% last week.The yen, seen as a haven by many investors, was weaker against the U.S. currency. The dollar-yen pair was up around 0.1% at 108.42, having fallen by around 0.9% in the previous five-day period. The dollar was also up around 0.1% against the franc.The offshore yuan recovered some of ground following three straight days of losses, with the dollar quoted down almost 0.1% against Chinese currency at 6.9945.The British pound, meanwhile, was one of the laggards among currencies. It fell as much as 0.3% versus the dollar as investors responded to the possibility that British Prime Minister Boris Johnson might walk away from talks over the U.K.’s future trade relationship with the European Union.

Recent Virus Developments

A 44-year-old Wuhan man who traveled to the Philippines is the first known person to have died outside China from the virus.Wenzhou, an eastern port of 9 million people, became the first city outside central Hubei province to impose quarantine measures due to the coronavirus outbreak. The city, some 700 kilometers from the epidemic’s origin in Wuhan, is in Zhejiang province, which has about 600 confirmed cases of the virus.China recorded 2,590 new cases for Feb. 1, and 45 deaths. Total infections rose to 14,380 in the country, with 304 deaths.More countries have blocked arrivals from China.The U.S. is studying the economic impact of the outbreak.Bloomberg is tracking the outbreak here.For latest on the virus, click here.

(Updates throughout.)

To contact the reporters on this story: Benjamin Purvis in New York at bpurvis@bloomberg.net;Michael G. Wilson in Sydney at mwilson176@bloomberg.net

To contact the editors responsible for this story: Paul Dobson at pdobson2@bloomberg.net, Benjamin Purvis, James Ludden

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