Credit: REUTERS/DADO RUVICHONG KONG, April 2 (Reuters) - The yuan fell to its lowest level in almost half a year on Thursday after the White House's dire warning on the prolonged spread of the coronavirus hurt sentiment and drove investors back to the safety of the U.S. dollar.
The onshore yuan CNY=CFXS lost as much as 0.4% in early trade to 7.1283 per dollar, its weakest since early October, before crawling back to 7.1038 by midday, still down 0.07% from the previous late close.
The offshore yuan CNH=D3 fell to a one-week trough before trading flat at 7.1198 at midday.
Global equities sold off and investors scrambled for dollars after President Donald Trump warned on Tuesday that the United States will face a "painful" two weeks in fighting the pandemic.
The global dollar index =USD was up 0.1% at 99.618, having surged as much as 0.25% in the morning.
While factories in China are gradually returning to work as its new infections fall, they are now facing a collapse in global demand as more countries impose lockdowns and other tough anti-virus measures.
"We are still in a bear market. When you have risk off in equities you would get dollar bids," said Kay Van-Petersen, global macro strategist at Saxo Bank in Singapore.
"Until we are out of that, it's hard for the USD to weaken structurally, not just against G10, but especially against EM and frontier market currencies," he added.
Two traders in Shanghai said yuan weakness in the morning attracted some bargain hunters, paring some of the currency's losses.
Analysts at China Construction Bank (Asia) also attributed yuan weakness to dollar strength, but added that the tides could turn again soon.
"If the epidemic overseas gradually comes under control, coupled with acceleration in the recovery of the Chinese economy, that could attract more capital inflows and push the RMB stronger," they wrote in a note on Thursday.
Also in the background were Trump's remarks that China's reporting of the coronavirus statistics seemed "a little bit on the light side," after Bloomberg News said a classified U.S. intelligence report had concluded that China had under-reported the total cases and deaths it had suffered.
Prior to the market open, the People's Bank of China set the midpoint rate CNY=PBOC at 7.0995 per dollar, slightly weaker than the Reuters estimate of 7.0949.
The Thomson Reuters/HKEX Global CNH index .RXYH, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 93.75, slightly weaker than the previous day's 93.76.
The yuan market at 0401 GMT:
ONSHORE SPOT:
Item
Current
Previous
Change
PBOC midpoint CNY=SAEC
7.0995
7.0771
-0.32%
Spot yuan CNY=CFXS
7.1038
7.099
-0.07%
Divergence from midpoint*
0.06%
Spot change YTD
-1.98%
Spot change since 2005 revaluation
16.51%
Key indexes:
Item | Current Previous Change Thomson Reuters/HKEX CNH index 93.7593.760.0Dollar index 99.618 99.511 0.1*Divergence of the dollar/yuan exchange rate. Negative number indicates that spot yuan is trading stronger than the midpoint. The People's Bank of China (PBOC) allows the exchange rate to rise or fall 2 percent from official midpoint rate it sets each morning. OFFSHORE CNH MARKET
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