AUD/USD Exchange Rate Sinks as Coronavirus Sours Risk Sentiment
The Australian Dollar to US Dollar (AUD/USD) exchange rate plummeted by -0.9% today, with the pairing currently trading around $0.601.
The ‘Aussie’ continues to suffer from a slump in risk sentiment as markets become increasingly gloomy the coronavirus’ negative impact on the global economy.
Australia’s economy, which relies heavily on global train, is also suffering from falling demand for its exports such as iron ore and precious metals, as China – Australia’s main export destination – continues to wrestle with the fallout of coronavirus.
Geoff Wilson, a Sydney-based fund manager, commented:
‘What happens in China is incredibly important to how global markets react over the next few months, both in terms of the progress of the virus and how quickly the economy is bouncing back.’
The Australian Dollar (AUD) is also performing badly after the OECD predicted that the Australian economy could fall by -22% due to the coronavirus pandemic. Consequently, market demand for the ‘Aussie’ is flagging as investors seek out safe-havens like the US Dollar and Swiss Franc instead.
The US Dollar (USD) Soars Despite Weak US Nonfarm Payrolls
The US Dollar (USD) continued to perform strongly against the ‘Aussie’ despite today’s US Nonfarm Payrolls report for March plummeting to a worse-than-expected -701 thousand.
US unemployment also shot up in March from 3.5% to 4.4%, with the fuller extent of the coronavirus-led slump in employment due to be revealed in next months’ report.
Nick Bunker, the Economic Research Director at the job site Indeed, commented:
‘Today’s numbers are shockingly bad and an understatement of the damage already done to the U.S. economy. If this is an indication of what was happening before the full force of the crisis hit, then it will be hard to come up with the words to describe the numbers in future months.’
The ‘Greenback’ did benefit from a stronger-than-expected ISM Non-Manufacturing PMI for March, however, dipped to 52.5 instead of contracting at the predicted 44.
ISM explained in its press release:
‘The non-manufacturing sector composite index indicates growth in March; however, the extreme slowing of supplier deliveries weighted heavily in the calculation.’
‘The other three subindexes that contribute to the NMI contracted strongly in March. Respondents are concerned about the coronavirus impact on the supply chain, operational capacity, human resources and finances, as well as the ramifications for the overall economy.’
The USD/AUD exchange rate is being buoyed by safe-haven demand as markets brace for another week of coronavirus developments and heightening expectations of a global recession worse than 2008’s economic crisis.
AUD/USD Forecast: US Dollar Will Continue to Reap Safe-Haven Demand
The Australian Dollar (AUD) investors will be awaiting Monday’s publication of the Australian TD Securities Inflation report for March. Any signs of this significantly falling due to the coronavirus outbreak would weigh on the ‘Aussie’.
The US Dollar (USD), meanwhile, will likely continue to be bolstered by rising safe-haven demand as the global economic outlook continues to darken.