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The new virus in China infects the yuan and raises doubts in emerging currencies

The new virus in China infects the yuan and raises doubts in emerging currencies

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The foreign exchange market seems to have been infected by fear of the economic consequences of the new virus detected in the Chinese city of Wuhan after an outbreak of pneumonia, a finding that has caused currencies such as the yuan or The Hong Kong dollar has depreciated since the beginning of this week.

In addition, the fall of these currencies against the US dollar generates new doubts in other currencies of emerging countries, which are still pending the evolution of the trade war between the United States and China or the worsening of the world economic situation.

The alert for the new coronavirus, which has already caused the death of 9 people and more than 440 infected, has made the dollar win positions against the yuan since the beginning of the week, as it had not done since August 5, 2019 , when US President Donald Trump announced new tariffs on China.

This Wednesday, a US dollar is changed around 6.90 yuan, compared to 6.86 at the end of last week.

The depreciation of the Chinese currency this week, according to Monex Europe analysts, responds to a “risk aversion” movement, which has also affected, although to a lesser extent, the Hong Kong dollar, with a change of 7.77 per each US dollar against 7.76 last Friday.

However, China’s fear of a mutation of the Wuhan virus that complicates its treatment together with the economic impact that it could have increases doubts about other currencies, especially in emerging countries, when other fronts of uncertainty still affect the market currencies in 2019.

In fact, the tension in the commercial plane caused the differential between the dollar and the euro to narrow for the benefit of the US currency, as XTB analyst Miguel Momobela explained to Efe, adding that the recent US and Iran conflict can make the dollar revalue even more.

And it is that last year the dollar managed to climb positions against the euro and came to cut the distance between both currencies to reach $ 1.09 per euro at the end of September, despite having started the month at $ 1,154, maximum level of the year.

The “brexit” was another of the foci of uncertainty last year and the pound sterling was greatly affected by the United Kingdom’s departure from the European Union, since of the 1,487 dollars to which the day of the referendum was changed (June 2016), is now at 1.30.

As for monetary policy, from the Ebury currency platform, both the Federal Reserve (Fed) and the ECB provide for maintaining interest rates at the current level – in the case of the US. between 1.5 and 1.75%, and in Europe in 0% -.

This stability could cause the euro to strengthen and move away from the dollar, although experts warn that the most important political appointment of 2020 cannot be lost sight of: the presidential elections in the United States on November 3 in which Trump party as a favorite, despite the recent impeachment process it faces.

Its continuation in the White House, together with a Republican House of Representatives, would not entail drastic changes in spending or fiscal policy, according to Ebury, although it would be necessary to see how the dollar reacts to its decisions at the geopolitical level.

As for other currencies, from XTB they focus on the Australian and Canadian dollars, after the central banks of both countries joined the wave of interest rates, despite having good macroeconomic data.

IG Spain analyst Aitor Méndez also quotes the Russian ruble, “the currency that has behaved better in 2019”, since at the beginning of that year 69.71 rubles were needed to get a dollar and by the end of the year it was enough with 61, 93 rubles.

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