Virus onslaught sends yuan’s value spiraling down

By Xie Jun Source:Global Times Published: 2020/2/3 18:32:59

File photo: A worker counts Chinese currency Renminbi (RMB) at a bank in Lianyungang, east China's Jiangsu Province, Aug. 11, 2015. (Xinhua/Si Wei)

The unexpected coronavirus outbreak in China has not only sent mainland stocks into a record-setting plunge on Monday, but is also pressing down the yuan's exchange rate. 

The yuan's central parity rate against the US dollar was down 373 basis points on Monday, the greatest drop since August 6, 2019, according to data released by the People's Bank of China, the country's central bank. 

Both the offshore and onshore yuan broke the 7 mark on Monday morning. By 18:00 pm, the onshore yuan stood at 7.0230 against the US dollar, down 1.62 percent, while the offshore yuan edged down by 0.26 percent to 7.0192. 

Monday was the first official working day in the Year of the Rat. The Chinese government has extended the Spring Festival holidays in order to prevent the spread of the coronavirus outbreak. 

As of midnight on Sunday, the virus had killed 361 in the mainland, surpassing the death toll of the 2003 SARS epidemic, which killed 349.

Zhou Yu, director of the Research Center of International Finance at the Shanghai Academy of Social Sciences, said the yuan's slump, just like the stock nosedive, has been triggered by a frantic market mood resulting from the coronavirus. 

"But I think it will be a temporary trend. The yuan will tend toward stabilization as the disease gradually comes under control," Zhou said, predicting the yuan will hover at around 7 against the greenback in the long term this year. 

But he acknowledged that the rebound will occur when the epidemic hits a solid turning point. "The turning point of the epidemic will be the turning point of the financial markets," he said. 

The number of new coronavirus cases in central China's Hubei Province continues to climb daily, but some medical experts have predicted the epidemic might reach its climax in the next 10-14 days. 

Zhou also said that the government might intervene to prop up the yuan if large-scale capital outflow occurs.

The yuan showed an appreciation trend approaching the end of 2019 as China and the US signed the phase one trade agreement to ease trade frictions. 


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