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Coronavirus outbreak | Global insurers to be hit by claims, financial market volatilities: Moody’s

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Bad times are in store for the insurance sector as more nations fall prey to the coronavirus or COVID-19 outbreak. Rating agency Moody’s sees a direct impact on global insurance companies due to a rise in claims and an indirect whiplash due to financial market fluctuations.

India's General Insurance Corporation of India (GIC) has an exposure to the global reinsurance market. So, any major impact on the reinsurance and insurance market globally will affect GIC Re's books.

“We currently expect these indirect effects to have a more material financial impact on the sector. Mortality levels would need to rise significantly to trigger a substantial rise in claims for life insurers. We foresee no significant impact from claims on mainstream non-life players,” Moody's said in a recent report.

Second order effects to cause greatest financial impact

The Coronavirus outbreak may trigger an economic slowdown and those fears are making financial markets increasingly volatile. Moody's sees an increasing likelihood of a global recession as long as the virus remains uncontained.

"Significant deterioration in equity markets and widening credit spreads, along with even lower interest rates, will weigh on insurers' profitability, capitalisation and business volumes," it stated.

Fears of additional cases being detected has been weighing on Indian financial markets. Benchmark indices ended in the red for the seventh consecutive session on March 2 as concerns over coronavirus continued to weigh on investor sentiment.

D-Street witnessed one of the most volatile sessions in the recent past on March 2, a swing of around 1,000-points, that wiped out most gains made on the Sensex.

Global reinsurers' pandemic exposure is significant at very high severity levels

Global reinsurers have benefited from a significant growth in China and the rest of Asia. However, the Moody’s report said their exposure to the region is still moderate relative to their overall portfolios. It foresees little impact on the reinsurance space given the "absence of significant international spread of the coronavirus and high mortality."

P&C commercial lines exposure is limited

Moody’s does not expect a significant rise in claims for commercial line insurers, although some sub-sectors, such as contingency business, may be affected. "Business interruption claims will be limited as these policies commonly exclude outbreaks of infectious disease, and pay only if physical damage occurs." it explained.

Trade credit insurers face rising claims due to economic slowdown
A slower consumer spending and negative pressure on China's goods and services sectors will likely lead to higher credit insurance claims. Moody’s expects a greater impact on these insurers' capitalisation and profitability in the event of a significant global economic slowdown. When it comes to India, it lists sectors like electronic goods, pharmaceuticals and automobile that have been hit due to a near shutdown of goods and component supply from China since January.

Explained: Post-Brexit, here's how getting a UK work visa will change

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Are you an Indian holding a Phd in a STEM (science, technology, engineering and mathematics) discipline? If so, getting a United Kingdom visa could become easier for you starting next year. That is because, even if your salary is below the minimum threshold set by the UK government in a proposed new regime, there are a few concessions.

These concessions will make you eligible for immigration under new rules that will kick-in from January 1, 2021.

This is one of the many new regulations that the UK government has proposed in its attempt to attract talent after exiting the European Union (EU) on January 31, 2020. Following this, a new set of rules will come into place which would end free movement of people.

The UK government will introduce an Immigration Bill to bring in a firm and fair points-based system to attract high-skilled workers.

Until now, migrants including those from India, were employed in high-skilled jobs like the ones in the IT sector and low-skilled jobs like those in construction, fast-food chains and grocery stores. The UK government's attempt is to mandate employers to hire locally for low-skilled jobs.

The total number of work visas granted (tier two) touched an all-time high of 1.1 lakh in 2019. Of these, over half were granted to Indians.

At 57,199, India was the top source for tier two or skilled work visas given to migrants in 2019. This was a 3 percent increase over 2018.

In February, the UK government said it is taking a phased approach to ensure smooth delivery of this new system and to allow sufficient time for everyone to adapt.

The new system

Taking guidance from the Migration Advisory Committee (MAC) report published in January, a minimum of 70 points will be required to be eligible to live and work in the UK.

MAC has recommended a reduction in the general salary threshold from £30,000 to £25,600. This means, even if you are paid a minimum of £25,600, you will be eligible for the relevant points.

The points-based system will provide simple, effective and flexible arrangements for skilled workers from around the world to come to the UK through an employer-led system.

Earlier, employers could decide who would be eligible to migrate depending on skill requirements. However, the UK government has said that they are taking back this power to decide on offering work visas to migrants.

In the new system, all applicants, both EU and non-EU citizens, will need to demonstrate that they have a job offer from an approved sponsor, that the job offer is at the required skill level and that they speak English.

A minimum B1 level of English would be necessary. In simple terms, a migrant should be able to effectively communicate in English including work-related matters, describing situations and writing simple and coherent text.

The B1 level also indicates that an individual will be able to 'cope' with most of the situations that would arise from work-related trips in the region, including conversing with strangers, asking for directions and addressing a meeting, among others.

In addition to this, if the applicant earns more than the minimum salary threshold, then the individual would be eligible to make an application. However, if they earn less than the required minimum salary threshold (not less than £20,480), the applicant will be eligible if they are highly skilled or have a relevant PhD for the job.

Each category has a set points system. For instance, while a salary of £25,600 or above would entitle a candidate to 20 points, job in a shortage occupation will be equivalent to 20 points. Speaking English is mandatory and would be equal to 10 points.

How will this work?

For example, a university researcher in a STEM subject wishing to come to the UK on a salary of £22,000, (which is below the general minimum salary threshold), he or she may still be able to enter if they have a relevant PhD in a STEM subject.

Likewise, a nurse wishing to come to the UK on a salary of £22,000 would still be able to enter the UK on the basis that the individual would be working in a shortage occupation, provided it continues to be designated in shortage by the MAC.

A list of the stills in shortage will be published by MAC. It is likely that professions like nurse, coder, data mining and technology-linked engineering will be high in demand due to shortage of local talent.

Some points could be tradable. The UK government has said that migrants will still be awarded points for holding a relevant PhD or if the occupation is in shortage, which they will be able to trade against a salary lower than the ‘going rate’ or the minimum threshold.

A STEM PhD would mean that a candidate could be eligible even if they are paid 20 percent lower than the minimum requirement.

The UK Home Office will continue to refine the system and may also include attributes that can be ‘traded’ against a lower salary. For example, this might include a greater range of qualification levels or other factors such as age or experience studying in the UK.

The MAC report said that about 70 percent of European Economic Area (EEA) resident citizens arriving in the UK since 2004 would be found ineligible for either a skilled-work, family or tier four visa.

Your insurer just wants to 'keep in touch'

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It's a Saturday morning, and you get a Whatsapp message. Is it your partner or friends asking about weekend plans? Oh, it's your insurance company!

Bharti AXA General Insurance announced on February 26 that it has started delivering policies and renewal premium to its customers through the instant messaging platform.

The insurer joins a list of companies like ICICI Prudential Life Insurance, Future Generali India Insurance, Bajaj Allianz General Insurance and Aditya Birla Health Insurance among others to offer products and services to customers.

In July 2019, Niti Aayog CEO Amitabh Kant had said that WhatsApp had 400 million active users in India. For insurers this seems like a golden opportunity, considering that insurance policies are a 'push' product in India where customers need to be nudged to buy it.

Indians are hooked to WhatsApp for personal and professional communication with workplace colleagues. Banks and mutual funds have also jumped on to the bandwagon, offering services on the messaging platform. So why will insurers back off?

Not only policy documents are being sent over WhatsApp, but customers are also allowed to submit claim documents and pictorial evidence for motor claims over these chats. For insurers, 'cross-selling' is the biggest opportunity on chat platforms.

The heads of sales at a Mumbai-based insurer told Moneycontrol that ever since a majority of users opted for the telecom regulator's 'Do Not Disturb' or DND service, it has been tough to contact customers to sell relevant products. Though insurers also experimented with Facebook and Twitter to contact customers, companies tasted little success.

WhatsApp does not have such DND service to bar promotional messages. The platform usually displays it as a 'business account' if it is registered that way. This is being used as a sales advantage. If the policyholder clicks on a link, insurers would get access to offering products and services on the chat platform.

WhatsApp is different. Young professionals in the age group of 25-30 years, who are the main target segment of insurance companies, are prolific users which also lessens the chances of them missing the message.

A study by smartphone brand Vivo and Cybermedia Research in December 2019 showed that an average Indian spent 1/3rd of their waking hours (the time a person is awake) on their phone, which translated to 1,800 hours a year.

With a high likelihood of a prospective customer rejecting insurers' calls by tracing identity details from apps like Truecaller, using WhatsApp has now become the top choice for companies.

However, just like the multiple pesky calls you would keep blocking on your smartphone, WhatsApp calls from sales-persons could soon become a reality. It could get worse if you are added to random WhatsApp groups for 'cross-selling' and promotional offers.

Why just insurers? Other financial services firms have already started using WhatsApp. These entities could soon be joined by real estate firms, retailers, food delivery apps and even the infamous eyewear brands who are ready to make the switch to chat platforms. It could be easy to ignore multiple text messages sent to lure customers. But over chat, this would be tough to miss.

But what about the dangers of over-use of technology?

While companies claim that all service requests and policy documents are encrypted, a smartphone being hacked is not uncommon. In fact, even Amazon's Jeff Bezos fell prey to a situation after private texts and pictures were leaked.

The young Indian is technologically savvy, but since they consume a lot of content on their smartphones, there are potential threats of data theft by hackers. Merely clicking on an unknown link could give access to your phone to third-party users who could then also control the device.

Insurance companies in India are yet to address these concerns. Also, within services offered on instant messaging platforms, there is no clarity on which set of insurance employees are able to access your personal data shared over chats.

For older customers, there are other challenges. Someone who has just started using WhatsApp at the age of 50 could find it a challenge to navigate the application. Here if a policy document or claim intimation would be over this messaging app, chances are that the customer could be unable to access it. A few incorrect steps would either lead to a wrong policy purchase or even rejection of a claim.

Physical services of insurance are still available. But if the idea is to make the process simpler and faster, it should be accessible to all.

Keeping in touch is a good practice. But when it comes to persistent insurance salespersons, maintaining a safe distance looks like a better option at least on WhatsApp.

Industry needs to focus on sustainable packaging materials: Commerce Secretary

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Industry needs to focus on sustainable packaging materials as one can not allow them to be a source of waste to spoil the environment, a top government official said on Thursday.

Commerce Secretary Anup Wadhawan said that packaging material should be biodegradable, re-usable and recyclable.

"We need to focus on this aspect. We cannot allow packaging to be a source of waste... littering the environment, spoiling the ecosystem and cause potential damage to animals," he said.

He was addressing a national conference on packaging, organised by Indian Institute of Packaging (IIP) here.

"We need to address this by making right choice of material," he said.

Further, Wadhawan said that there was a need encourage entrepreneurship and skilling to promote growth of the sector.

Speaking about the sector, IIP Joint Director Madhab Chakraborty said that the current Indian market size of the sector is about USD 32 billion.

He said three new centres of the institute are coming up at Guwahati, Bangalore, and Andhra Pradesh.

"We have got land for all these three centres," he said adding that there was huge demand in the sector for industry to work on innovative environment-friendly materials.

The IIP is a national apex body which was set up in 1966 by the packaging and allied industries and the Ministry of Commerce with the specific objective of improving the packaging standards in the country.

The institute is an autonomous body working under the administrative control of the ministry.

Central govt releases Rs 19,950 crore GST compensation to states

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The central government has released Rs 19,950 crore as GST compensation to states, taking the total amount released to them to over Rs 1.2 lakh crore. In a statement, the finance ministry said Rs 19,950 crore was released to states and union territories last Monday.

When the Goods and Services Tax (GST) came into force in July 2017, states, which lost powers to levy taxes such as VAT, were guaranteed to be compensated for any loss of revenue in the first five years of GST implementation.

This compensation was to come out of a pool that is to be created by levy of cess on certain sin and luxury goods over and above the GST tax rate. The shortfall is calculated assuming a 14 percent annual growth in GST collections by states over the base year of 2015-16.

"With this release of GST compensation, the central government has released a total of Rs 1,20,498 crore towards GST compensation to the states/UTs during current fiscal," the statement said.

The money released compares to only Rs 78,874 crore having been collected as compensation cess in the current FY (till January 31, 2020).

Finance Ministry officials said total GST compensation cess of Rs 62,611 crore was collected in the FY 2017-18, out of which Rs 41,146 crore was released to the states/UTs that fiscal as GST compensation.

In FY 2018-19, Rs 95,081 crore was collected as GST compensation cess of which Rs 69,275 crore was released to the states/UTs as GST compensation.

Officials said that as on March 31, 2019, an amount of Rs 47,271 crore compensation cess collected had remained unutilised after the release of GST compensation to the states/UTs in the 2017-18 and 2018-19.

Dollar and gold continue to shine even as sentiment improves

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There is an almost daily swing on market sentiment as traders grapple with the bigger picture implications of COVID-19. The dissemination of newsflow out of China is looking to be more positive. Although the total number of deaths has topped 2000, the numbers of daily new cases and deaths are now falling. Furthermore, the official information is that Chinese businesses are getting back to work following weeks of shutdown and quarantine. Traders are faced with a dilemma of whether they can rely on the official data. Levels of pollution and electricity usage have been often used as more reliable gauges in the past and will need to be watched as to whether they marry up with the official data. It does seem as though knee-jerk reactions to bad news (Apple’s revenue warning being the latest) tend to last for a day or so before traders refocus on the dovish leanings of central banks and a continued tendency to “climb the wall of worry”. For markets, there is a more settled outlook to sentiment forming today. Through all of this, the dollar remains a go-to destination of capital choice, whilst gold is also playing strongly. What is interesting though, is that sentiment on the oil markets has turned a corner, with an appetite to buy into weakness now increasingly prevalent.

Wall Street closed lower last night with the S&P 500 -0.3% at 3370. However, with US futures looking perky today, around +0.3% back higher, this is allowing a decent Asian session (Nikkei +0.9%, Shanghai Composite -0.3%). European markets are taking this positively, with FTSE futures +0.7% and DAX futures +0.6% pointing to decent early gains today. In forex, there is a positive risk skew to majors, with JPY underperforming and a rebound for AUD and NZD. Once more we see EUR supported early in the European session, but can the cycle of sell-offs be broken and be translated into a recovery?  In commoditiesgold continues to climb higher by +$3 (+0.2%), whilst oil is also supported and is over half a percent higher.

The key data on the economic calendar kicks off with UK CPI at 0930GMT. Headline UK CPI is expected to fall by -0.4% in January but this would still mean a year on year improvement to +1.6% (from +1.3% in December). Core UK CPI is expected to drop by -0.6% on the month but the year on year reading is expected to increase slightly to +1.5% (from +1.4% in December).  Into the afternoon, the focus is on inflation for the US, but this time it is the PPI, or factory gate inflation. US PPI is at 1330GMT and is expected to see headline PPI increase to +1.6% in January (from +1.3% in December), whilst core PPI is expected to pick up to +1.3% (from +1.1% in December). US Building Permits at 1330GMT are expected to increase slightly to 1.450m (from +1.420m in December). US Housing Starts are expected to fall to 1.425m (from 1.608m in December). The FOMC minutes for the January meeting are at 1900GMT where the focus will be on what the Fed had to say about the impact of the Coronavirus and inflation.


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Mining Minister Pralhad Joshi announces India to stop thermal coal import by FY24

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Union Coal and Mines Minister Pralhad Joshi has announced that the government looks to stop the substitutable import of thermal coal from 2023-24. The government wants to bridge the substitutable shortfall by 2023-24, he told PTI on the sidelines of a two-day brainstorming session organised at Kevadia in neighbouring Bharuch district, about 90 km from Vadodara.

The government recently introduced an ordinance to amend regulations to open up coal mining to other firms outside the steel and power sectors, Joshi stated.

"Whatever the substitutable shortfall is there, we want to achieve it by 2023-2024. We want to stop the substitutable import of the coal."

The government may conduct an auction of 100 fully explored blocks, Joshi said. The latest move in the coal sector is expected to create an efficient energy market, thereby bringing more competition, while reducing coal imports.

Forex - Japanese Yen Fall Amid Rising Asian Stocks

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The Japanese yen fell against the U.S. dollar on Wednesday in Asia, while the Chinese yuan inched up as traders continued to focus on developments on the coronavirus front.

The USD/JPY pair gained 0.2% to 110.04 by 1:30 AM ET (05:30 GMT) as the Japanese yen lost some safe-haven appeal due to the uptick in Asian stocks today.

The USD/CNY pair rose 0.1% to 7.0012. The People's Bank of China (PBOC) has set the Yuan reference rate 7.0012 at versus Tuesday's fix at 6.9826.

Meanwhile, the US dollar index that tracks the greenback against a basket of other currencies inched up 0.1% to 99.370.

The Hubei province reported 132 deaths for Feb. 18. So far, China has 74,186 confirmed cases of the virus, according to government data.

While the new cases in Hubei fell for a second day, the World Health Organization cautioned that "every scenario is still on the table" in terms of the epidemic's evolution, and that it was too earlier to know if the epidemic was being contained.

"The market is trying to model itself on coronavirus and it's struggling really hard to understand how that goes and that's pushing capital in to the U.S.," said Chris Weston, head of research at Melbourne brokerage Pepperstone, in a Reuters report.

"The U.S. remains that least-dirty T-shirt, the best house in a fairly shabby-looking neighborhood. As a destination for capital, it's still the light that you look for."

The EUR/USD pair steadied at 1.0793 after falling to near a two-year low yesterday as investor sentiment in Germany deteriorated more than expected in February, adding to concerns about the ongoing weakness in the euro zone.

The Japanese yen fell against the U.S. dollar on Wednesday in Asia, while the Chinese yuan inched up as traders continued to focus on developments on the coronavirus front.

The USD/JPY pair gained 0.2% to 110.04 by 1:30 AM ET (05:30 GMT) as the Japanese yen lost some safe-haven appeal due to the uptick in Asian stocks today.

The USD/CNY pair rose 0.1% to 7.0012. The People's Bank of China (PBOC) has set the Yuan reference rate 7.0012 at versus Tuesday's fix at 6.9826.

Meanwhile, the US dollar index that tracks the greenback against a basket of other currencies inched up 0.1% to 99.370.

The Hubei province reported 132 deaths for Feb. 18. So far, China has 74,186 confirmed cases of the virus, according to government data.

While the new cases in Hubei fell for a second day, the World Health Organization cautioned that "every scenario is still on the table" in terms of the epidemic's evolution, and that it was too earlier to know if the epidemic was being contained.

"The market is trying to model itself on coronavirus and it's struggling really hard to understand how that goes and that's pushing capital in to the U.S.," said Chris Weston, head of research at Melbourne brokerage Pepperstone, in a Reuters report.

"The U.S. remains that least-dirty T-shirt, the best house in a fairly shabby-looking neighborhood. As a destination for capital, it's still the light that you look for."

The EUR/USD pair steadied at 1.0793 after falling to near a two-year low yesterday as investor sentiment in Germany deteriorated more than expected in February, adding to concerns about the ongoing weakness in the euro zone.

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Dollar shines against euro, riskier peers as virus hit widens

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The dollar stood tall over the languishing euro and heavily sold exporter currencies on Wednesday, as investors reckoned with a deepening economic fallout from the coronavirus.

The new coronavirus has caused 2,004 deaths in China and infected more than 74,000 people, while measures to contain it have paralyzed the economy and the supply chains it feeds.

Apple Inc (O:AAPL) has warned it will probably miss its March quarter sales guidance amid disrupted production and shopping habits. Car makers are idling plants for lack of parts.

The yield curve between U.S. three-month bills and 10-year notes inverted overnight, a bearish economic signal, and German investor confidence slumped as its economy stagnates, sending the euro cheaper than $1.08 for the first time since 2017.

"The market is trying to model itself on coronavirus and it's struggling really hard to understand how that goes and that's pushing capital in to the U.S.," said Chris Weston, head of research at Melbourne brokerage Pepperstone.

"The U.S. remains that least-dirty T-shirt, the best house in a fairly shabby-looking neighborhood. As a destination for capital, it's still the light that you look for."

Against a basket of currencies, the greenback is sitting by a four-month high at 99.452 (=USD). It touched a one-week high against the Australian and New Zealand dollars overnight.

Both Antipodean currencies are heavily exposed to China, and both have lost roughly 5% against the dollar this year . Norway's krone, sensitive to the global growth outlook via oil exports, has shed 6% in 2020 and slumped to an 18-year low overnight .

The euro (EUR=) has fallen 3.7% amid increasing signs of divergence between the European and U.S. economies.

The single currency last bought $1.0796. Moves in major currencies were slight in morning trade.

China says figures indicating a slowdown in new cases in recent days show the aggressive steps it has taken to curb travel and commerce are slowing the spread of the disease beyond central Hubei province and its capital, Wuhan.

That has not stopped worries mounting, with hedge funds turning to proxies from railway movements to port activity and air pollution to try and gauge how much production remains offline.

Gold is sitting above $1,600 an ounce for the first time since U.S.-Iran tensions in the Middle East sent it spiking in early January . Priced in euros, gold's value jumped almost 2% to a record high overnight (XAUEUR=R).

Investors are looking to the minutes from the Federal Reserve's January meeting, due to be released at 1900 GMT, for insight in to the Fed's thinking about virus risks.

European purchasing managers index numbers and part-month Korean export figures, both due on Friday, are also going to be closely watched for the first hard signs of economic impact.

"We assess the risks are firmly skewed towards the negative effects of COVID-19 lasting longer," Nomura analysts wrote in a note, using the World Health Organization's designation for the illness caused by the coronavirus.

"Therefore, we maintain our cautious view through positions in long USD/THB, long USD/CNH, long USD vs GBP, NZD and long AUD/NZD."

China's yuan was last steady at 7.0017 per dollar in offshore trade .

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Dollar shines against euro, riskier peers as virus hit widens

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The dollar stood tall over the languishing euro and heavily sold exporter currencies on Wednesday, as investors reckoned with a deepening economic fallout from the coronavirus.

The new coronavirus has caused 2,004 deaths in China and infected more than 74,000 people, while measures to contain it have paralyzed the economy and the supply chains it feeds.

Apple Inc (O:AAPL) has warned it will probably miss its March quarter sales guidance amid disrupted production and shopping habits. Car makers are idling plants for lack of parts.

The yield curve between U.S. three-month bills and 10-year notes inverted overnight, a bearish economic signal, and German investor confidence slumped as its economy stagnates, sending the euro cheaper than $1.08 for the first time since 2017.

"The market is trying to model itself on coronavirus and it's struggling really hard to understand how that goes and that's pushing capital in to the U.S.," said Chris Weston, head of research at Melbourne brokerage Pepperstone.

"The U.S. remains that least-dirty T-shirt, the best house in a fairly shabby-looking neighborhood. As a destination for capital, it's still the light that you look for."

Against a basket of currencies, the greenback is sitting by a four-month high at 99.452 (=USD). It touched a one-week high against the Australian and New Zealand dollars overnight.

Both Antipodean currencies are heavily exposed to China, and both have lost roughly 5% against the dollar this year . Norway's krone, sensitive to the global growth outlook via oil exports, has shed 6% in 2020 and slumped to an 18-year low overnight .

The euro (EUR=) has fallen 3.7% amid increasing signs of divergence between the European and U.S. economies.

The single currency last bought $1.0796. Moves in major currencies were slight in morning trade.

China says figures indicating a slowdown in new cases in recent days show the aggressive steps it has taken to curb travel and commerce are slowing the spread of the disease beyond central Hubei province and its capital, Wuhan.

That has not stopped worries mounting, with hedge funds turning to proxies from railway movements to port activity and air pollution to try and gauge how much production remains offline.

Gold is sitting above $1,600 an ounce for the first time since U.S.-Iran tensions in the Middle East sent it spiking in early January . Priced in euros, gold's value jumped almost 2% to a record high overnight (XAUEUR=R).

Investors are looking to the minutes from the Federal Reserve's January meeting, due to be released at 1900 GMT, for insight in to the Fed's thinking about virus risks.

European purchasing managers index numbers and part-month Korean export figures, both due on Friday, are also going to be closely watched for the first hard signs of economic impact.

"We assess the risks are firmly skewed towards the negative effects of COVID-19 lasting longer," Nomura analysts wrote in a note, using the World Health Organization's designation for the illness caused by the coronavirus.

"Therefore, we maintain our cautious view through positions in long USD/THB, long USD/CNH, long USD vs GBP, NZD and long AUD/NZD."

China's yuan was last steady at 7.0017 per dollar in offshore trade .

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