The yuan has been under increasing pressure ever since the outbreak of the coronavirus. On Monday the selling pressure of the currency was exacerbated by a prolonged holiday. Investors seem to be growing ever more anxious over the virus which has taken the lives of over 1100 people so far.
Unfortunately, there seemed to be little confidence in the Chinese economy with the stock market opening the week with significant sell-offs.
On Monday, Chinese shares fell by the daily limit. The CSI 300 Index dropped 9% during the day, the biggest loss since 2015. Ending the year down 2.8% on the 23rd Jan, the Shanghai Composite Index has now fallen 7.7%.
Cryptocurrencies responded by spiking temporarily. Bitcoin (BTC) passed $9600 — its highest price since October 2019. However, those gains soon got sold off and the currency returned to its $9200-9400 price range.
Just in Time
However, it would seem the Chinese authorities responded just in time by injecting over one trillion yuan into the economy:
The stimulus package seems to have caught the yuan in its freefall, easing fears and tension. But for how long?
Part of the slump in the Chinese market may be attributed to the fact that Chinese regulators are taking steps to limit short-selling. The CSRC announced this new directive, and the CSRC has also instructed brokerages to discontinue the facility for clients to sell borrowed stocks.
Chinese officials have also been urging the public to maintain their calm, to be rational and objective. Unfortunately, it is difficult for people in China and elsewhere to maintain their composure when the amount of coronavirus cases has reached over 45000 and the death toll has passed 1100.
Chinese authorities have also taken a number of other financial support measures to aid the economy in addition to the 1.2 trillion-yuan stimulus package. There have also been interest–rate cuts in the Hubei province region, the source of the coronavirus.
The stimulus package, worth close to $170 billion dollars, is expected to be used in a reverse repurchase operation to ensure market stability, with an aim to raising liquidity in the banking system to 900 billion yuan ($129 billion).Tags: China, coronavirus, forex, lifestyle, market, money, yuan