· Heavily-sold Asian currencies were modestly firmer on Tuesday, as investor risk appetite recovered with an apparent slowdown in the rate of coronavirus infection, even as the death toll rose.
China reported 108 new coronavirus deaths on Tuesday, bringing the total number of people killed in the country to 1,016, yet the number of new cases fell.
The Australian dollar, which is highly sensitive to China’s economic health because of Australia’s commodity-heavy export profile, rose 0.3% to $0.6707. It had hit a decade low on Monday and remains nearly 4.5% lower this year. [AUD/]
China’s yuan was firm at 6.9773 per dollar and the People’s Bank of China held its mid-point guidance relatively steady, even though the U.S. dollar had gained sharply overnight.
The Japanese yen was slightly softer by mid-session at 109.84 per dollar. Volumes were lightened because it is a public holiday in Japan and markets there are closed.
· The World Health Organization has warned the spread of coronavirus among people who had not been to China could be “the spark that becomes a bigger fire”.
JPMorgan has again downgraded forecasts for growth this quarter, as businesses struggle to get back to work and supply chain disruptions bite.
The nerves showed in the New Zealand dollar, which languished close to a three-month low at $0.6390 ahead of a central bank policy meeting on Wednesday.
Federal Reserve Chairman Jerome Powell appears before Congress on Tuesday to begin two days of testimony and is expected to reiterate that the U.S. economy is doing well but that rates can stay low given subdued inflation.
· USD/JPY bulls stepping in as USD remains in demand, near 110.00
USD/JPY is picking up fresh bids amid a better market mood, as markets ignore the rising coronavirus death toll. Broad-based US dollar strength ahead of the Fed Chair Powell's testimony powers the spot towards 110.00
The USD/JPY pair offered a neutral-to-bearish stance throughout the day, now heading into the Asian session with the same tone. The 4-hour chart shows that a flat 20 SMA capped the upside, although the pair held above directionless 100 and 200 SMA. The Momentum indicator has entered negative territory but lacks directional strength while the RSI is flat at around 53. The bearish case could become clearer on a break below 109.40, the immediate support, with the market then targeting the 108.65 region.
Support levels: 109.40 109.00 108.65
Resistance levels: 110.00 110.35 110.70
· Coronavirus outbreak could sink China’s smartphone shipments by 30% in Q1, IDC says
China’s smartphone shipments for the three months ending in March could decline by more than 30% from the same period a year ago, International Data Corporation said on Tuesday.
The world’s largest smartphone market could experience a so-called “Black Swan effect” in the first half of the calendar year due to the new coronavirus outbreak that has killed more than 1,000 people on the mainland, according to the research firm.
A black swan is said to be a rare, unpredictable event with potentially severe consequences.
“The coronavirus outbreak impacted the Lunar New Year’s shopping season in late January and is also expected to have adverse effects in the following months,” IDC said in a statement, adding that it expects “China’s smartphone shipments to drop more than 30% year-on-year in 2020Q1.”
The virus outbreak will also “create uncertainty in product launch plans, the supply chain, and distribution channels, in the mid and long term,” IDC said.
· Federal Reserve Chair Jerome Powell is likely to sound fairly upbeat about the outlook for U.S. economic growth when he testifies this week in the first of his twice-a-year updates to Congress, even as he nods to the potential threat from the coronavirus in China.
That assessment would echo the formal report the Fed submitted to the U.S. Congress on Friday, which repeated the central bank’s view that its current target range for short-term borrowing costs, between 1.5% and 1.75%, is “appropriate” to keep the expansion on track.
“His message will probably be that, if rate cuts are coming, they would come solely in response to global disruptions associated with the virus,” said Robert Perli, an economist at Cornerstone Macro. “He will likely say clearly that the U.S. economy is inherently healthy.”
· The World Bank is offering technical assistance to China to help battle the coronavirus epidemic but no new loans, the development lender’s president, David Malpass, said on Monday.
Malpass told Reuters the bank was working with the World Health Organization (WHO) to aid China, including offering advice about past health crises, but did not plan any financial assistance because China has ample resources of its own.
· Oil prices rose around 1% on Tuesday in sympathy with a rally in equity markets but investors remained jittery over the Wuhan virus that has now killed over 1,000 in China.
Brent crude LCOc1 rose 53 cents, nearly 1%, to $53.80 a barrel by 0730 GMT, retreating from an intraday high of $54.16. U.S. West Texas Intermediate CLc1 was up 46 cents, about 1%, at $50.18 a barrel.
Reference: CNBC, Reuters, FXstreet
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