CNY unlikely to recover solidly given overnight risk-off sentiment, says Commerzbank

Given the risk-off sentiment overnight, it is hard to expect to see a solid recovery in the Chinese yuan, after the currency touched lower due to somewhat improving virus headlines, according to the latest research report from Commerzbank.

One month after the Wuhan lockdown, the Covid-19 seems to have been more or less contained for now. Outside of Hubei province where Wuhan city is located, all other Chinese provinces reported a single-digit number of new infected cases on February 24.

While everyone is looking at China's next policy step in order to boost the virus-weakened economy, a precondition for economic catchup is obviously an effective containment on the new virus. It seems for now that the light can be seen at the end of the tunnel.

For Chinese policymakers, both fiscal and monetary policies are likely to turn to heal the economic pains due to the virus.

Meanwhile, the PBoC deputy governor yesterday confirmed a slew of measures, including further adjustment to interest rates and reserve requirement ratio, encouraging the "combat-virus bonds" issued by policy banks as well as targeted lending to virus-hit entities, the report further noted.