Chinese policymakers are preparing measures to support their economy jolted by a coronavirus outbreak.
The government is debating whether to lower the planned 2020 economic growth target of around 6%. China’s central bank is likely to lower its key lending rate – the loan prime rate.
The virus outbreak, which coincided with the Lunar New Year holidays, has stifled economic activity in the country.
The People’s Bank of China (PBOC) has already pumped in hundreds of billions of dollars into the financial system this week. The China’s central bank attempted to restore investor confidence. The markets shuddered at the potentially damaging impact of the virus on world growth.
Support measures will be concentrated on the retail, catering, logistics, transportation and tourism sectors.
China’s economy grew 6% in the fourth quarter, bringing 2019 expansion to 6.1% in 2019, the weakest in nearly three decades. Demand at home and abroad weakened in part due to the bitter Sino-U.S. trade war.
The U.S. Commerce Department finalized a new rule to impose anti-subsidy duties on products from countries that it has determined undervalue their currencies against the dollar. The move could provide a fresh irritant in U.S.-China trade talks just weeks after the signing of a Phase 1 trade agreement.
Beijing accused Washington of spreading fear about the fast-spreading coronavirus that originated in China.
START TRADINGForex – China’s virus measures to support economy
Risk appetite picked up, although the spread of a novel coronavirus in China remained a threat. Despite the relative market calm on Tuesday, the outbreak continued to generate unnerving headlines.
The dollar index rose to 97.872 after gaining 0.44% on Monday, its biggest advance this year.
Safe-haven currencies, such as the Japanese yen and Swiss franc, were down 0.2%-0.3% on the day. The dollar firmed to 109.04 yen from an overnight low of 108.30
The euro faded a fraction to $1.1059 but remained well within recent snug ranges.
The Australian dollar climbed as much as 0.5% to $0.6725 on Tuesday as risk appetite picked up. Aussie pulled away from a 10 1/2-year low of $0.6670 touched last October, after the RBA left its main cash rate unchanged at 0.75%.
Britain’s pound rebounded from a near-six week low against the U.S. dollar that it hit in earlier London trade. It was last up 0.1% at $1.3012 having lost 1.5%. Sterling has been under pressure from worries over a hard Brexit.
Oil prices lost ground amid hopes for new output curbs from OPEC+offset any potential drop in demand triggered by the coronavirus outbreak. Brent crude added 0.8% to $54.90 a barrel, while U.S. crude gained 1.1% to $50.67.
Gold fell to its lowest in nearly a week as the dollar firmed after China’s virus measures to support economy stoked investors’ risk appetite. Spot gold fell 0.4% to $1,570.41 an ounce by 1055 GMT, its lowest since Jan. 29. U.S. gold futures fell 0.5% to $1,574.70.
PLEASE NOTE The information above is not investment advice.
Sources: Reuters, Investing, CNN money