Wires

Yuan weakens as coronavirus, Trump's Europe travel ban batter markets

SHANGHAI, March 12 (Reuters) - China's yuan fell on Thursday as financial markets were roiled by U.S. President Donald Trump's announcement of a temporary travel ban from Europe to curb the spread of the cornonavirus, which has already heavily disrupted world economic activity. Trump's decision to suspend all travel from Europe, except from the United Kingdom, to the United States for 30 days comes after world health officials declared the outbreak a pandemic. Prior to market opening on Thursday, the People's Bank of China (PBOC) set the midpoint rate at 6.9641 per dollar, 29 pips softer than the previous fix of 6.9612, the weakest since March 2. In the spot market, onshore yuan opened at 6.9800 per dollar and was changing hands at 6.9732 at midday, 129 pips weaker than the previous late session close. Analysts at China Construction Bank (Asia) said despite major economies stepping up policy support to counteract the hit from the pandemic, investors remained pessimistic about the outlook. "Markets will continue to have extreme turbulence in the short term, and it is hard to see obvious signs of stabilisation," they said in a note, adding that yuan investors will likely adopt a "buy low, sell high" strategy. Separately, hopes for Beijing to roll out additional monetary easing measures rose after the cabinet said China will make targeted cuts in bank reserve requirement ratios (RRR) to boost lending support for small companies that have been hit hard by the coronavirus outbreak. "Without exception these calls by the Premier will be implemented by the PBOC almost immediately, so we expect the PBOC to announce a targeted RRR cut in the next few days, possibly before or over the coming weekend," said Lu Ting, chief China economist at Nomura. A trader at a Chinese bank said monetary easing measures should help improve economic fundamentals in the mid- to long-term, but the higher liquidity would inevitably pressure the currency in the short term. The spread of the coronavirus in mainland China was largely under control, with Hubei province only reporting eight new infections, the first time the epicentre of the pandemic had recorded a daily tally in single-digits. The global dollar index fell to 96.216 at midday from the previous close of 96.507. The offshore yuan was trading at 6.9773 per dollar as of midday.

The yuan market at 0403 GMT:

ONSHORE SPOT:

Item Current Previous ChangePBOC midpoint 6.9641 6.9612 -0.04%Spot yuan 6.9732 6.9603 -0.18%Divergence from 0.13%

midpoint*

Spot change YTD -0.14%Spot change since 2005 18.69%

revaluation

Key indexes:

Item Current Previous ChangeThomson 93.07 93.23 -0.2

Reuters/HKEX CNH index

Dollar index 96.216 96.507 -0.3

*Divergence of the dollar/yuan exchange rate. Negative number indicates that spot yuan is trading stronger than the midpoint. The People's Bank of China (PBOC) allows the exchange rate to rise or fall 2 percent from official midpoint rate it sets each morning.

OFFSHORE CNH MARKET

Instrument Current Difference

from onshore

Offshore spot yuan 6.9773 -0.06%*Offshore 7.073 -1.54%

non-deliverable forwards

**

*Premium for offshore spot over onshore

**Figure reflects difference from PBOC's official midpoint, since non-deliverable forwards are settled against the midpoint. .

(Reporting by Winni Zhou and Andrew Galbraith)

Related Tags