· Yuan slips as spread of China virus unnerves markets
China’s yuan tumbled on Tuesday, pulling away from six-month highs against the dollar, while the safe-haven yen rallied as the spread of a pneumonia-like virus in China sparked a sudden bout of risk aversion and rattled world markets.
China reported a fourth death from a new coronavirus as the number of cases continued to rise, just as hundreds of millions of Chinese prepared to travel for the Lunar New Year holiday.
Global stocks fell as the outbreak rekindled memories of the severe acute respiratory syndrome (SARS) in 2002-2003, another coronavirus which broke out in China and killed nearly 800 people in a global pandemic.
The yuan fell almost 0.6% in offshore trading to 6.9049 per dollar, off Monday’s six-month highs. Onshore, the yuan fell to its lowest in over a week at 6.9094.
Currencies linked to Chinese trade and tourism also dropped. The Australian dollar touched its lowest in over a month at $0.68445. The New Zealand dollar fell as much as a third of a percent to $0.6589 before recovering some ground. The Korean won dropped 0.6%.
In contrast, the yen gained 0.15% to 110.05 per dollar as investors moved into safe-haven assets like the yean and U.S. Treasuries. The Swiss franc rose to 0.96750 to the dollar.
The dollar index, which measures its value against a basket of six currencies, was down at 97.57 -- near the highest level in a month.
Speaking at the World Economic Forum in Davos, U.S. President Donald Trump said negotiations with China over a phase-two trade deal will start soon. The phase-one deal signed last week boosted confidence in the world economic outlook, supporting the dollar.
Sterling benefited from news that Britain’s economy created jobs at its fastest rate in nearly a year in the three months to November, potentially undermining the case for a Bank of England interest rate cut next week.
The pound was last up 0.3% at $1.3053. The euro held a narrow range around $1.1105 before Thursday’s European Central Bank meeting.
The mood among German investors brightened far more than expected in January on hopes Germany’s economy might not be hurt as much by trade tensions as previously thought, a survey from Germany’s ZEW research institute showed.
· The Republican-controlled U.S. Senate rejected three Democratic efforts on Tuesday to obtain documents and evidence in President Donald Trump’s impeachment trial, an early sign the proceeding could advance along lines favorable to Trump.
As the third impeachment trial in U.S. history began in earnest, senators voted 53-47 along party lines to block three separate motions from Democratic leader Chuck Schumer to subpoena records and documents from the White House, the State Department and the Office of Management and Budget related to Trump’s dealings with Ukraine.
· LATE JANUARY TO EARLY FEBRUARY
- Democrats are expected to continue pushing to hear from witnesses during the trial. If McConnell’s resolution on initial trial rules is adopted, senators would likely vote after the trial has started on whether to introduce witness testimony. If the Senate decides to subpoena witnesses, they would first be deposed privately and before the Senate decided on public testimony.
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- Trump is scheduled to deliver the annual State of the Union address to a joint session of Congress.
· The toll from the Wuhan coronavirus in China rose to six deaths on Tuesday and the first case was reported in the United States, sending markets tumbling on fears of economic damage as tourists canceled travel plans and airports stepped up screening.
China’s government may be responding better to the outbreak of a new coronavirus than it reacted to SARS, according to analysts, who say the virus appears to be less lethal.
China on Monday acknowledged that the coronavirus, which can have pneumonia-like symptoms, was spreading from human to human.
Stocks had reversed early losses, but sold off again Tuesday afternoon, after reports that the virus was discovered in a man in Washington state who had traveled from China.
· Oil prices fell on Tuesday on expectations that a well-supplied global market, including supplies from record U.S. production, would be able to absorb disruptions that have cut Libya’s crude production to a trickle.
Brent LCOc1 futures settled down 20 cents at $64.59 a barrel. U.S. crude CLc1 fell 20 cents, or 0.3%, to $58.38 per barrel.
Almost all of Libya’s crude export capacity is now under force majeure - a waiver on contractual obligations - after pipeline blockades in the east and west of the country hindered oil production.
If Libyan exports are halted for any sustained period, storage tanks will fill within days and production will slow to 72,000 barrels per day (bpd), said a spokesman for state oil company NOC. Libya has been producing about 1.2 million bpd recently.
Reference: CNBC, Reuters
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