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FOREX-Yen soft, but weak yuan and Sing dollar tumble flag virus risks

Published 02/05/2020, 02:05 PM
Updated 02/05/2020, 02:08 PM
© Reuters.  FOREX-Yen soft, but weak yuan and Sing dollar tumble flag virus risks
EUR/USD
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GBP/USD
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USD/JPY
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USD/SGD
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0293
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005380
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* Yen nurses losses after worst session vs USD in 6 months
* S$ suffers steepest slide in 2 years after MAS easing
hints
* Yuan slides past 7 per dollar
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook
SINGAPORE, Feb 5 (Reuters) - The dollar held gains against
the safe-haven yen on Wednesday as China's response to the
coronavirus outbreak raised hopes it could be contained, even as
the death toll rose sharply.
The mainland China toll rose by a new daily record of 65 to
490. The number of infections there hit 24,324. Yet with more than 99% of confirmed cases confined to China,
drastic quarantine measures in place and the central bank
pouring trillions of yuan into the financial system, investors
have partially unwound their recent flight to safety.
The yen had tumbled with gold, bonds and other safe-havens
overnight in its worst session in six months. The Japanese
currency nursed losses on Wednesday - last trading near a
week-low at 109.45 yen per dollar JPY= .
The Australian dollar bounced from a four-month trough of
$0.6679 to $0.6737, with hawkish comments from the central bank
chief offering extra support AUD=D3 . The greenback firmed against the euro EUR= and pound
GBP= .
A slightly weaker yuan and a collapse in the Singapore
dollar, after hints at virus-driven policy easing, show that an
abundance of caution remains, however.
Singapore's central bank said on Wednesday that there is
room for it to ease policy as the virus weighs on growth,
sending the Sing dollar SGD= down about 0.8%, its steepest
slide in two years. It last traded at 1.3810 per greenback, its weakest since
October.
"It's liquid trading ability means that markets may be
expressing a lot of regional views via the Sing dollar," said
Vishnu Varathan, head of economics at Mizuho Bank in Singapore.
"It's actually a good barometer for us, to let us know that
risks are not in the rear-view mirror. We are probably at the
traffic-light junction."
China's yuan, another barometer of investors' view of the
outbreak, also turned negative - weakening back past the
symbolic 7-per-dollar mark to 7.0058 CNY=CFXS .
One of the reasons the virus has caused so much alarm is
that much remains unknown about it, including the mortality rate
and transmission routes. The severity of its economic impact, on
the other hand, is becoming increasingly obvious.
As people stay home, shops shut and factories lie idle in
China, the effect has begun to ripple across the globe.
Hong Kong's Cathay Pacific Airways Ltd 0293.HK said on
Tuesday it will cut around 30% of its capacity over the next two
months. Hyundai Motor 005380.KS will suspend production in
South Korea because of disruption to the supply of parts.
Economists are estimating a hit of between 0.2 to 0.3
percentage points to global growth. "The economic shocks to mainland China brought by the
coronavirus are likely to be 2 to 3 times larger than the SARS
debacle in 2003," said DBS economist Chris Leung, referring to a
previous epidemic that cut roughly a percentage point from GDP.
"The deepening of physical interconnectivity both within and
outside China ever since has increased substantially."


(Editing by Sam Holmes and Jacqueline Wong)

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