Chinese Yuan Weakens to One-Month Low as Markets Worry About Economic Impact of Coronavirus

The Chinese yuan is trading close a one-month low against the US dollar over raised concerns about the possible impact of the coronavirus outbreak on the Chinese economy. At the time of writing, USD/CNH is trading at around 6.975.

Although China has been working actively to prevent the spread of the virus, more than 4,500 people have been affected so far and the death toll from coronavirus has exceeded 100. Several cities in China have been on lockdown while several consumers have canceled plans for festive spending during the ongoing Lunar New Year holidays.

This is likely to impact China’s consumer spending, travel and tourism, as well as overall economic growth, causing a weakness in the yuan. There is also the risk of the spillover effect impacting global economic growth in the near future.

USD/CNH has also turned bullish over a strengthening in the US dollar, driven by the risk-off sentiment in global markets which has raised the demand for the greenback as a safe haven. In times of uncertainty, forex traders shun riskier currencies in favor of the dollar.