Australian Dollar US Dollar (AUD/USD) Exchange Rate Sinks to a 17-Year Low on Covid-19 Fears

AUD/USD Exchange Rate Sinks as Australia’s Economic Outlook Darkens

The Australian Dollar to US Dollar (AUD/USD) exchange rate has fallen to a 17-year low as deepening fear around the global coronavirus outbreak drove a scramble for the safe-haven ‘Greenback’. The pairing is currently trading around $0.594.

Ray Attrill, the Head of Currency Strategy at the National Australia Bank (NAB), was downbeat in his analysis:

‘Various fiscal support measures are being wheeled out so if we do see those highly elevated levels of risk aversion come down, that would provide some support but there’s not much sign of that so far.’

With China being Australia’s largest trading partner, ‘Aussie’ investors are pessimistic about the world’s largest economy’s growth in the first quarter. Any signs of a substantially weakening Chinese economy, which was hit heavily by Covid-19 last month, would further weaken the Australian Dollar.

The Australian Dollar (AUD) is under pressure from rising odds of an interest rate cut from the Reserve Bank of Australia (RBA). The RBA is expected to cut by another 50 basis points to save the flagging economy.

As market volatility increases and more countries are forced to lock down amid growing Covid-19 fears demand for the risk-sensitive Australian Dollar continues to fade.

US Dollar (USD) Exchange Rate Soars on Safe-Haven Demand

The US Dollar (USD) gained against many of its peers as investor demand for the safe-haven ‘Greenback’ continues to grow amid global economic uncertainty.

Mitul Kotecha, Senior Emerging Markets Strategist at TD Securities, commented:

‘The demand for the dollar has outweighed any hit to the U.S. currency from sharply lower Fed rates. [Emerging market] assets will continue to struggle as investors steer clear of relatively risky assets and maintain a bias for safe havens.’

However, US Dollar (USD) investors are remaining cautious after US Treasury Secretary Steve Mnuchin said that America’s inaction on Covid-19 could result in the US unemployment rate shooting up by 20%.

USD traders will be eyeing US President Donald Trump’s unveiling of a stimulus package to aid the American economy throughout the global coronavirus crisis.

AUD/USD Outlook: Could the ‘Aussie’ Improve on Easing Market Volatility?

Australian Dollar (AUD) investors will be looking ahead to tomorrow’s interest rate decision from the Reserve Bank of Australia. With Australia’s central bank expected to slash interest rates we could see market appetite for the risk-averse ‘Aussie’ sink further.

Tomorrow will also see the publication of Australia’s unemployment rate report for February. Any signs of deterioration in the nation’s employment data would also prove AUD-negative.

The US Dollar (USD) will remain sensitive to global coronavirus developments throughout this week. If market volatility shows any signs of easing, we could see the ‘Greenback’ lose some of its safe-haven appeal and benefit the risk-correlated Australian Dollar.

David Moore

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