The Chinese currency barreled to a six-week peak versus the US greenback late Wednesday after an emergency interest rate cut by the US central bank sent the dollar sliding.
The yuan (CNY) wrapped up its onshore sessions at 6.9331 per USD, rising over than 0.6 percent on the day and its most impressive close since January23, when the coronavirus started to worsen and health experts announced a broad containment action.
The Federal Reserve rolled down its policy rate overnight in an attempt to cushion the world's biggest economy from the virus paranoia, but the shock decision only added to US financial market doubts regarding a wider and lasting slowdown.
The People's Bank of China, which has been consistently easing its policies during the past few weeks in reaction to the epidemic, maintained its short-term borrowing expenditures unchanged on Wednesday. But money managers anticipate the Chinese lender to disclose more aid measures soon as companies find it very difficult to return to normal business operation.
If China's currency can keep the gains through Thursday's late-night close, it will register its best trading since June 2019. Prior to the the opening bell on Wednesday, the PBOC adjusted its midpoint rate at 6.9514 per USD, 2 pips (measurement unit to define the change in value between two currencies) firmer compared to the previous fix of 6.9516.
In the spot market, the Chinese onshore yuan opened trade at 6.9400 per USD and rose to a peak of 6.9288 at one instance in morning sessions. As of midday, the spot CNY was changing hands at 6.9334, 427 pips of 0.62 percent firmer than its previous close. If the currency can maintain its rally, it would register its best session since June 20, 2019.
The Chinese yuan has now regained all that it shed since the Lunar New Year holiday, when Wuhan - the epicenter of the coronavirus outbreak - released an official announcement to lock down the city on January 23 to contain its spread. Strict measures on travel and quarantines were soon imposed across the country.
Investors noted that considering the coronavirus was not fully under control locally or abroad, the Chinese currency should not rise sharply from its current levels. While the number of new cases in China has been on the decline, health officials caution it is too early to relax. Economic activity is only slowly bouncing back from the shock, and the the fast spread of the coronavirus in other regions is triggering fears of a global recession.
