China's currency-denominated exports for the January-February period plunged nearly 16 percent from the same period a year earlier, Customs figures indicated, while the country's imports dropped 2.5 percent as an aggressive virus created severe distortions to factory production.
The data left China with a trade shortfall of 43 billion yuan in the first two months of 2020, based on estimates by Reuters, citing Customs report. China did not report trade numbers for the period by itself. Customs disclosed in February it would consolidate January-February initial trade figures, in conjunction with how some of its other key economic indicators are released in the next few weeks.
Prior to the opening bell on Friday, the People's Bank of China set the yuan's midpoint rate at 6.9337 per US dollar, 66 point-in percentage (pips) or 0.1 percent steadier compared to the previous mark of 6.9403.
However, some investors noted Friday's fixing came in not as big as their estimates, an indication the PBOC may not want to view the Chinese currency firm up substantially in the current trend. Friday's official metrics was 63 pips weaker compared to Reuters' projection of 6.9274. Despite the yuan's move lower versus the greenback on Friday, its near-term downside is still likely to be limited.
Though China has had some major breakthroughs in handling the outbreak in the past days, there are worries about its global spread and what that would signify for the country's already shaken financial markets.
In contrast, the latest Reuters survey of 15 Wall Street market observers, the bearish bets on the Chinese currency were reduced after the US central bank's 50bps rate cut while investors turned bearish on the Indonesian currency, amid the lingering worries from the coronavirus. "Supported by a sluggish dollar, short positions on the Chinese yuan remained at their lowest levels since early January this year,", analysts said.
Fears over the economic effects of the virus have dragged yields down globally as capitalists scramble to safe-haven assets, with the US stock market falling and its Treasury output sliding to new lows. China's 10-year government equity yields plunged to its lowest in almost 18 years, while Chinese stocks were likewise battered.
In the spot market, the Chinese onshore yuan opened the session at 6.9440 per USD and was changing hands at 6.9563 at mid day. Several investors bared the market will keep a close eye on February's trade figures, set for posting on Saturday, which will provide an early clue on the effect of the outbreak's impact to China's economy.
