Growing concerns over the outbreak of a mysterious pneumonia-like virus in China, which has killed 9 and infected hundreds more, has impacted currency markets and pushed the Chinese yuan lower.
"It is starting to have an impact … on financial markets over the past 24 to 48 hours," Adarsh Sinha, co-head of Asia rates and foreign exchange strategy at the Bank of America Securities told CNBC's "Street Signs" on Wednesday.
On Tuesday, the Japanese yen — often seen as a safe-haven in times of economic uncertainty — strengthened sharply against the dollar to levels below 109.8. It last traded at 110.01.
Meanwhile, both the onshore and offshore Chinese yuan have seen a steep weakening against the greenback and last traded at 6.902 and 6.9036, respectively. The yuan saw levels below 6.86 earlier in the trading week.
So far, more than 400 cases have been confirmed by public healthcare officials, with the bulk of them coming from China. Cases have also been confirmed in Thailand, South Korea, Japan and Taiwan.
Concerns of the disease spreading were further fueled by the fact that millions are expected to be traveling within China and outside the country ahead of the extended Lunar New Year holiday that is set to begin on Saturday.
"The key thing here is just the uncertainty and also the uncertainty heading into the holiday period," Sinha said. "From an investor point of view, people are just reducing risk and I think that's what we're seeing particularly in the exchange rate markets in the region."
"It's not so much that people have a view on how this develops, but it's just the uncertainty ahead of a period where we're not going to be getting a dollar-(Chinese yuan) fixing and … the local stock markets (in China) are going to be closed," the strategist added. The Chinese currency is allowed to trade within a narrow 2% band above or below a so-called daily midpoint fix that is set by the People's Bank of China.
The virus outbreak has evoked memories of the SARS pandemic in 2002 and 2003. The outbreak of the severe acute respiratory syndrome at that time killed about 800 people, most of them from China and Hong Kong, according to data from the World Health Organization.
"SARS had a significant impact on Asia (foreign exchange), rates and equities from the point at which infections were officially identified by the World Health Organisation in February 2003 to the peak of new daily infections (23 April 2003)," analysts at Nomura wrote in a report dated January 21.
In particular, Nomura said the Korean won and Singapore dollar sold off broadly against the dollar at that time. The South Korean currency was last at 1163.99 per dollar while the Singapore dollar traded at 1.3497 against the greenback.
"Under similar conditions, we would expect a similar behavior, with most of the pressure concentrated on (the Korean won) and (Chinese yuan)," the analysts said. "If infections become region-wide, the rest of Asia would likely suffer, especially (the Singapore dollar) and (Thai baht)."
Still, Bank of America Securities' Sinha said: "I think people are looking at that as a case study, if you will, but the fact is 2003 was 17 years ago and i think especially in terms of Asia spillovers to the rest of the world, it is a very different time."
— CNBC's Weizhen Tan contributed to this report.