Yuan drops after virus death toll hit like ‘ton of bricks’

• The PBOC has vowed it will use tools to support key sectors, having already pumped billions of dollars into the money market to stabilise confidence.
• The global dollar index fell to 99.011 at midday from the previous close of 99.049.
• The People's Bank of China set the midpoint rate at 6.9785 per dollar, 67 pips weaker than the previous fix of 6.9718.

SHANGHAI: China's yuan slid against the dollar on Thursday after a record daily rise in deaths in central Hubei province, the epicentre of the coronavirus outbreak, fuelled concerns over the threat of a global pandemic.

The number of deaths rose by 242 to stand at 1,310 in the province by Wednesday, provincial health officials said on their website, sparking a sell-off in offshore yuan to a low of 6.9910 before onshore trade began.

Both markets later recouped some losses after the authorities clarified that the jump was due to a new methodology for diagnosis.

"The Hubei coronavirus update headline had initially hit like a ton of bricks given this is one of the market's biggest fears," said Stephen Innes, chief market strategist at AxiCorp.

By midday, onshore spot yuan changed hands at 6.9804, some 86 pips weaker than the previous late session close.

Several traders said the numbers of newly confirmed cases and deaths were beyond market expectations, as many investors had thought the situation was starting to stabilise.

"In any case, the substantial upward revision reversed the decline trend of newly confirmed cases in China and investors reassessed the China data accuracy and actual situation of coronavirus spread in China," said Ken Cheung, chief Asian FX strategist at Mizuho Bank in Hong Kong.

"In our view, the market impact should prove to be short-lived if the revision was one-off followed by public health experts' endorsement on the methodology change."

Some market participants expect the yuan to continue trading in tight ranges in the near term as the government's pledge to roll out more powerful stimulus should be implemented soon.

The PBOC has vowed it will use tools to support key sectors, having already pumped billions of dollars into the money market to stabilise confidence.

Prior to market opening on Thursday, the People's Bank of China set the midpoint rate at 6.9785 per dollar, 67 pips weaker than the previous fix of 6.9718.

The global dollar index fell to 99.011 at midday from the previous close of 99.049.

The offshore yuan was trading at 6.982 per dollar as of midday.