Yen jumps, yuan slumps on worries China struggling to contain virus

Monday,   27-Jan-2020   09:06 AM (IST)

The yen rose and the yuan fell in offshore trade on Monday as worries that China is struggling to contain the spread of a pneumonia-like virus sparked a bout of risk aversion. Japan's currency, often sought as a safe-haven in times of uncertainty, rose to the highest in almost three weeks versus the dollar, while the yuan fell to its lowest since Jan. 8. China's cabinet announced it will extend the Lunar New Year holidays to Feb. 2, to strengthen the prevention and control of the new coronavirus, state broadcaster CCTV reported early on Monday. The holidays had been due to end on Jan. 30. Hong Kong has also banned the entry of visitors from China's Hubei province, where the new coronavirus outbreak was first reported, highlighting the difficulty officials face during a peak travel season. Health authorities around the world are racing to prevent a pandemic of the virus, which has infected more than 2,000 people in China and killed 76. There are concerns that tourism and consumer spending could take a hit if the virus spreads further, which would discourage investors from taking on excessive risk. The yen rose 0.3% to 108.91 per dollar on Monday, reaching its strongest level since Jan. 8. Japan's currency also jumped around 0.5% versus the Australian and New Zealand dollars as worries about the virus drew traders toward safe-haven currencies and away from currencies that are more sensitive to risk. In the offshore market, the yuan fell more than 0.3% to 6.9625 against the dollar, its weakest since Jan 8. The dollar index against a basket of six major currencies was little changed at 97.884. Traders said market moves could be exaggerated due to low liquidity, because financial markets in China, Hong Kong, and Australia are closed for holidays. The virus, which emerged late last year from illegally traded wildlife at an animal market in the central Chinese city of Wuhan, has spread to other countries, including Singapore, South Korea, Canada, Japan, and the United States. China's Hubei province, where Wuhan is located, said on Monday that 76 people have died and 1,423 new cases of the coronavirus outbreak have been identified as of end of Sunday. The outbreak has evoked memories of Severe Acute Respiratory Syndrome (SARS) in 2002-2003, another coronavirus which broke out in China and killed nearly 800 people in a global pandemic.