· The Japanese yen held onto gains against the dollar on Friday, as fresh doubts about the scale of the coronavirus outbreak supported demand for safe-haven currencies.
The Chinese yuan nursed losses as the flu-like virus, which emerged late last year in China’s central Hubei province, slammed the brakes on consumer spending and manufacturing.
The euro languished at multi-year lows versus the dollar and the Swiss franc as investors grow more pessimistic about the outlook in the euro zone before the release of gross domestic product data later on Friday.
The yen held steady at 109.81 per dollar in Asia on Friday, following a 0.25% gain the previous session.
In the onshore market, the yuan slipped 0.09% to 6.9841 per dollar, while its offshore counterpart eased slightly to 6.9860, following a 0.2% decline on Thursday.
The euro fell 0.1% to $1.0827, the lowest since April 2017, as investors braced for the release of GDP data from Germany and the euro zone later on Friday.
The pound was little changed at $1.3046 following a 0.64% gain on Thursday due to expectations that British Prime Minister Boris Johnson’s appointment of a new finance minister will lead to more fiscal spending to help Britain weather its transition away from the European Union.
· The Federal Reserve is accelerating the pace of its withdrawal from short-term funding markets, even as investors’ demand for the central bank’s cash remains elevated.
The New York arm of the Fed announced on Thursday that it will further cut the size of its interventions in the repo market, where investors exchange high-quality collateral such as Treasuries for cash. It is the latest step in its attempt to wean investors off the funding it has provided since short-term borrowing costs spiked in September.
The new plan reduces the maximum amount the Fed will lend overnight each day from $120bn to $100bn — a change that will kick in on Friday. Moreover, the Fed will limit the amount it will lend in the form of two-week loans to $25bn as of Tuesday, from its current $30bn offering, and pare that amount even further in early March. At that point, the Fed will lend a maximum of $20bn on a two-week basis.
Analysts were primed for the shift, thanks to numerous reminders from chairman Jay Powell and other Fed officials in recent weeks that the central bank seeks to gradually transition away from active interventions in the repo market. The reductions were somewhat sharper than some had expected, however.
· China’s finance ministries have allocated 80.55 billion yuan ($11.5 billion) for virus prevention and control efforts as of Thursday, Ou Wenhan, assistant finance minister, said Friday at a press conference in Beijing, according to a CNBC translation of his Mandarin-language remarks. He added that 41 million yuan has already been paid out.
The total allocation is an increase of about $2 billion from the 66.74 billion yuan the ministry disclosed last week.
· The U.S. does “not have high confidence in the information coming out of China” regarding the count of coronavirus cases, a senior administration official told CNBC.
The official also noted that China “continues to rebuff American offers of assistance.”
· China’s coronavirus outbreak showed no sign of peaking with health authorities on Friday reporting more than 5,000 new cases, while passengers on a cruise ship blocked from five countries due to virus fears finally disembarked in Cambodia.
The new figures give no indication the outbreak is nearing a peak, said Adam Kamradt-Scott, an infectious diseases expert at the Centre for International Security Studies at the University of Sydney.
“Based on the current trend in confirmed cases, this appears to be a clear indication that while the Chinese authorities are doing their best to prevent the spread of the coronavirus, the fairly drastic measures they have implemented to date would appear to have been too little, too late,” he said.
· The coronavirus-hit Chinese economy will grow at its slowest rate since the financial crisis in the current quarter, according to a Reuters poll of economists who said the downturn will be short-lived if the outbreak is contained.
A Feb. 7-13 Reuters poll of 40 economists based in mainland China, Hong Kong, Singapore, as well as Europe and the United States, predicted China’s annual economic growth in the first quarter of 2020 to slump to 4.5% from 6.0% in the previous quarter.
That drop was expected to drag down the full-year growth rate in 2020 to 5.5% from 6.1% in 2019, its weakest since at least 1990 when comparable records began.
However, economists were optimistic the economy would bounce back as soon as the second quarter, with growth then forecast to recover to a median 5.7%, according to the poll.
· Japan’s exports likely fell for a 14th straight month while machinery orders are expected to have dropped at the fastest pace in over a year, a Reuters poll showed on Friday, as activity in the world’s third-largest economy slows.
While both trade and machinery order data due next week likely predate the significant worsening of the coronavirus seen in January, the outbreak is expected to add to existing challenges for the country’s export and factory sectors.
Exports are expected to have fallen 6.9% in January from a year earlier, after a 6.3% decline in December, the poll of 17 economists found.
Analysts say the expected drops in exports last month were partly due to China’s Lunar New Year holidays and that the hit from the coronavirus outbreak will likely appear in February exports data.
· Judy Shelton, President Trump’s nominee as Fed governor, faced intense questioning from Democrats during a confirmation hearing.
Shelton “has too many alarming ideas and has flipped-flopped on too many important issues to be confirmed” Sen. Sherrod Brown said.
Shelton’s confirmation is not assured; if she loses even two Republican votes it would kill the nomination in committee.
· Oil prices edged higher Friday, on track for their first weekly gain in six weeks, backed by expectations that major producers will implement deeper output cuts to offset slowing demand in China caused by the coronavirus epidemic.
Brent crude futures LCOc1 were up 13 cents at $56.47 a barrel by 0731 GMT, after gaining 1% the previous session. Brent is 3.7% higher for the week, the first increase since the week of Jan. 3.
U.S. West Texas Intermediate (WTI) futures CLc1 were 14 cents higher at $51.56 a barrel. The contract rose 0.5% on Thursday and is now 2.4% higher for the week.
Reference: Reuters, CNBC
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