- China cut rates as expected, sending USD/CNH to fresh session highs.
- Markets treating the rate cut as an acknowledgment of the coronavirus-led slowdown.
The upside in the USD/CNH is gathering steam with China cutting interest rates to counter fears of deeper coronavirus-led slowdown.
The world’s second-largest economy cut the one-year Loan Prime Rate (LPR) to 4.05% as expected from 4.15%. Meanwhile, the five-year rate has been reduced to 4.75% from 4.8%.
Markets were expecting China to deploy more stimulus measures to battle the coronavirus’ impact on the economy. The likes of Goldman Sachs and other major investment banks have warned of a marked slowdown in the first quarter.
It remains to be seen if the latest rate cut helps the economy absorb the shock. Currently, markets are taking it as an acknowledgment of the impending slowdown, as evidenced by the decline in the offshore Yuan.
The Chinese currency fell from 7.012 per US dollar to 7.0185 US dollar in response to the rate cut. At press time, USD/CNH is trading around 7.012.
As per the latest reports, more than 2,100 people have died from coronavirus across the globe. Meanwhile, the death toll in Hubei province, the epicenter since the beginning of the coronavirus outbreak, has risen to 2,029. China’s National Health Commission is expected to release numbers for all of China’s provinces later, according to CNN.
With the coronavirus showing no signs of slowing down, the CNH could continue to lose ground.
Technical levels
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