The Chinese currency moved up against the US dollar, backed by positive news of containment of the outbreak in China where the coronavirus was first detected, and as capitalists awaited a stimulus from central banks.
The core parity rate of the Chinese yuan strengthened 111 pips to 6.9403 against the US dollar Thursday, highlighting its strongest rally since January 23, based on figures from the China Foreign Exchange Trade System.
Chinese leader Xi Jinping's surprise visit to Wuhan, the epicenter of the virus crisis, on Tuesday also raised optimism the disease was under control. No new cases of the virus outside of the central province of Hubei was reported for the third consecutive day, Tuesday.
Before the opening bell, China's central bank set the mid-point rate of the yuan (CNY) at 6.9389 per USD, ending seven days of successively narrow fixings.
In the spot currency trading market, the yuan is allowed to elevate or drop by at least 2 percent from the core parity rate in each trading session. The Chinese currency's central parity rate against the greenback is hinged on a weighted average of prices provided by currency traders before the start of the inter-bank trading each business day.
Investors disclosed that the coronavirus has been the major element swaying the Chinese currency's behavior during the past weeks, with many market players becoming very edgy that the virus could develop into a pandemic. According to a Chinese bank trader, Xi's visit to Wuhan greatly eased investor worries.
Increases in the yuan were capped, as some market players noted they would measure US economic stimulus to lift the economy prior to initiating large bets on the currency.
Some analysts attributed the more stable yuan to China's moderately improving financial market as authorities heighten efforts to contain the spread of the coronavirus. China has vowed a series of measures that include keeping sufficient liquidity and slashing funding expenditures to boost the economy.
World markets took a pounding on Tuesday after a huge drop in oil prices added to concerns over global growth as traders counted the rising economic costs of the current health emergency.
The US dollar kept its steady pace after US President Donald Trump announced the White House will conduct a media briefing on Tuesday with regards economic steps in response to the virus situation. Such measures to manage its negative effects could bring major instability to the US dollar and other key currencies.
