· The yuan and its proxy, the Australian dollar, were on the defensive on Monday as China’s share market reopened with big losses after the Lunar New Year break and anxiety over a virus outbreak in the country kept investors on guard.
The offshore yuan eased 0.1%, hitting one-month low of 7.0117 per dollar while its onshore unit fell over 1% from its levels before the holiday to 7.0125 per dollar.
The Australian dollar fetched $0.66925, up slightly on the day but was precariously close to its 10-1/2-year low of $0.6670 touched last October.
The euro stood at $1.1084, having risen 0.6% last week for its first weekly gain in five helped by a boost from month-end money flows from European exporters on Friday.
Elsewhere, sterling fell 0.2% to $1.3172.
Britain laid out a tough opening stance for future talks with the European Union following its exit last week, saying it would set its own agenda rather than meeting the bloc’s rules.
· EUR/USD TECHNICAL ANALYSIS: BEARISH
The Euro short sharply higher against the US Dollar, scoring the largest one-day rise in a month. Most of the move seems to have been driven by USD selling amid swelling Fed rate cut speculation amid worries about the negative impact on economic growth of the Wuhan coronavirus outbreak.
Prices are now positioned to challenge the bounds of the downtrend in play since the beginning of the year. That is reinforced by the underside of support-turned-resistance at the floor of the rise from October’s lows. The dominant trend bias seems bearish absent a daily close above these barriers.
In the context of near-term positioning, such a reversal might look like a return above 1.1150. The next upside hurdle of interest thereafter is the December high at 1.1239. Alternatively, bearish resumption faces initial support in the 1.0968-90 zone. A close below that is likely to target the October 1 bottom at 1.0879.
· The majority of China’s growth hubs have delayed the resumption of business by at least a week as the country tries to control the spread of a new coronavirus that has killed more than 200 people.
As of Monday morning, at least 24 provinces, municipalities and other regions in China have told businesses not to resume work before Feb. 10 at the earliest. That’s according to publicly available statements from the governments.
These cities, provinces or municipalities have announced a delay to resumption of work:
1. Beijing: encouraged companies to have employees work from home until Feb. 10.
2. Hubei, the epicenter of the outbreak, has told businesses not to reopen until at least Feb. 14. However, officials said Friday that Hubei would further extend the holiday to an “appropriate extent,” according to state-owned newspaper People’s Daily. Hubei residents who work outside the province were also asked to stay put.
3. Tianjin: Businesses and schools are not to reopen until further notice.
· Some Chinese technology firms are continuing to manufacture parts and products despite government calls across various cities and provinces for work to be halted as Beijing seeks to stop the spread of the coronavirus ravaging the country.
Chinese telecom giant Huawei Technologies Co Ltd said on Monday it had resumed production of goods including consumer devices and carrier equipment, and operations are running normally. The company restarted manufacturing in line with a special exemption that allows certain critical industries to remain in operation, despite Beijing’s call to halt all work in some cities and provinces.
· The spokesman said most of the production was in Dongguan, a city in the southern Guangdong province.
The impact from a virus epidemic on China’s economy will be limited and temporary, and the country’s financial markets will return to normal in the long run, a commentary in a newspaper owned by the central bank said on Monday afternoon.
· The United States has acted to create and spread fear following a coronavirus outbreak in China instead of offering any significant assistance, the Chinese foreign ministry said on Monday.
The United States was the first nation to suggest partial withdrawal of its embassy staff, and the first to impose a travel ban on Chinese travelers, said ministry spokeswoman Hua Chunying.
· Brent crude prices fell on Monday to their lowest in more than a year, dragged down by worries about lower demand in China, the world’s largest oil importer, following a coronavirus outbreak there.
There are signs fuel demand has plunged in China as airlines have canceled flights to halt the spread of the coronavirus and as provinces delay the reopening of factories after the Lunar New Year holiday. Supply chains across the world’s second-largest economy and crude consumer have been disrupted, prompting its biggest refiner Sinopec to cut output by about 12% this month.
Brent crude was at $56.44 a barrel by 0750 GMT, down 18 cents, or 0.3%, Prices dropped by as much as 2.1% to $55.42, the lowest since Jan. 4, 2019.
U.S. West Texas Intermediate (WTI) crude rose 10 cents to $51.66 a barrel, after earlier hitting a session low of $50.42, down 2.2% to the lowest since Jan. 14, 2019.
Reference: Reuters, CNBC, FX Street
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