Dollar sinks on China virus impact fears

The dollar has sunk to the lowest level in a decade amid concerns the ­impact of coronavirus sweeping China will hit the economy.

The dollar finished New York session over the weekend at US66.73c

The Australian dollar has sunk to the lowest level in a decade amid concern that fallout from the ­coronavirus sweeping China will deliver a short-term hit to the economy.

At the same time the currency has lost ground as the US dollar found a lift following the release of strong jobs numbers on Friday.

The Australian dollar finished New York session over the weekend at US66.73c, after falling US0.87c. The last time the currency was at these levels was in March 2009 when the domestic economy was still being buffeted by the global financial crisis.

The US dollar index, which measures the US currency relative to a basket of currencies, finished at 98.70 points — the highest since October and up 0.5 per cent on Friday.

The figures showed that the US jobs market, a crucial indicator of the economy’s health, remained on a strong footing. The US added 225,000 jobs in January, beating expectations and putting the jobless rate at 3.6 per cent.

The Dow Jones Industrial Average declined 0.9 per cent on Friday to 29102.51 Friday, pulling back from Thursday’s record. The S&P 500 fell 0.5 per cent to 3327.71. Both indexes still posted their biggest weekly point gains since June 2019.

Australia’s S&P/ASX 200 ended on a more subdued note, up 0.1 per cent for the week.

Authorities in China have counted more than 37,000 cases infected with the coronavirus — of which more than 800 have been fatal — over recent months. This is higher than the 774 deaths from the 2002 outbreak of SARS.

sdf sdf sdf s dfs dfs df

AMP Capital chief economist Shane Oliver said that with a third of Australia’s exports going to Chine, there are “concerns about the impact of the coronavirus outbreak on Australian export earnings”.

Dr Oliver is tipping Australia’s GDP to contract during the March quarter, with the economy likely to see at least a 0.2 per cent to 0.3 per cent hit from reduced tourist, education and resources earnings. Also hurting growth would be slower growth from a summer of devastating bushfires.

“If the virus is contained relatively quickly then growth should start to recover from the June quarter,” Dr Oliver said. However, it will still have a very severe impact on global growth in the current quarter as people stay at home in China, travel stops and supply chains are disrupted globally even if for a few weeks.

BHP was reportedly looking to delay some shipments of copper concentrates amid a shutdown of factories across China. While a BHP spokesman told The Australian the miner was “working closely with copper customers” in China, he declined to comment on a Bloomberg report of a delay to shipments.

China accounts for about half of global copper demand.

Over the weekend the influential China Iron & Steel Association said its steelmaking members were permitted to reduce production in light of the coronavirus crisis.

“Steelmakers should appropriately adjust production schedules based on orders, finances, ability to transport materials,” China Iron & Steel Association said. The sector should “avoid malignant competition, manage traders, and strictly not sell at low prices and disrupt the market”.

China accounts for around 80 per cent of Australia’s exports of the key steelmaking ingredient iron ore.

Investment bank Nomura has also pencilled in a negative growth for Australia in the first quarter, particularly with a downbeat view on the impact of coronavirus across the industry.

“We expect a big economic shock to China with large spillover effects on the rest of Asia. but the depth, breadth and length of (the coronavirus) is uncertain,” Nomura’s analysts noted.

The brokerage ranked Australia sixth in a list of 11 countries — after Hong Kong, Singapore, Thailand, Taiwan and Malaysia — according to their economic exposure to the outbreak.

On Friday the Reserve Bank of Australia conceded that China’s coronavirus outbreak could hit Australia harder than the 2003 SARS epidemic, but governor Philip Lowe predicted the domestic economy would rebound after a further slowdown in the first half of this year due to the impact of bushfires and coronavirus.