Coronavirus: China’s yuan set to fall as millions return to work amid Covid-19 crisis
- China’s yuan has eased only 0.6 per cent against the US dollar this year, much less than the currencies of South Korea or Singapore
- But analysts say the yuan will face increased volatility as the new coronavirus continues to dampen economic activity in China
China's yuan exchange rate is set to weaken after a period of stability as the country gradually returns to work amid economic activity that has been severely dented by the coronavirus epidemic, analysts said.
The yuan has eased by 0.6 per cent against the US dollar this year, much less than the South Korean won’s decline of 2 per cent and the Singapore dollar’s drop of 3 per cent. The euro has tumbled by as much as 3.6 per cent.
Market optimism is gradually fading and the exchange rate faces greater volatility as China’s workforce slowly returns to their jobs and normalise distortions caused by soft trading activity over the Lunar New Year holiday, said Zhou Hao, senior emerging market economist Asia at Commerzbank.
There is debate on whether the yuan needs to catch up with the depreciation of other currencies. China’s growth and the virus situation are all negative for the yuan
“The yuan is not reflecting a reasonable level now because of the impact from the holidays,” he said. “There is debate on whether the yuan needs to catch up with the depreciation of other currencies. China’s growth and the virus situation are all negative for the yuan.”