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Aussie dollar at GFC level lows

Published February 24, 2020

Author Rowan Murphy

 The Australian Dollar has found itself on the wrong side of risk opening this morning at essentially decade lows. It struggled heading into the local close last week, briefly managing to trade above 0.6600 it has opened again this morning quickly slipping back below this level already.

Given the coronavirus updates the market has been receiving it’s no wonder that it has come off in concert with spikes in the VIX (fear index). Over the weekend there were several reports of a spike in coronavirus cases in parts of China (outside Hubei), as well as in South Korea, Italy, Iran and Japan and that the incubation period (which the world had been using to quarantine potential  carriers) could be substantially inaccurate. This has continued to suppress market sentiment as market participants consider the idea that perhaps the virus isn’t as ‘under control’ as previously assumed.

That’s put downward pressure on risk, yes even reflected in equities. There’s been a clear play into safe-haven assets with the Dollar’s (DXY) continuing rally, trading at 3 year highs, and 10 Year US Treasuries testing life below the 1.50 level, suggesting the market may be re-evaluating the global growth outlook.

The currency is being battered from all corners currently as participants increase their bets that the next RBA meeting is ‘live’ for a rate cut after last month’s unexpected lift in the unemployment rate and obviously there is an extraordinary move into the safety (being the US Dollar) from markets with the potential non-containment of the coronavirus. With a relatively light week of data expect the markets to be directed by risk appetite and coronavirus updates.

 

 

Adam Nikitins and Stewart McCallum were appointed Joint and Several Voluntary Administrators of EncoreFX (Australia) Pty Ltd on 30 March 2020.

Rees Logan, Adam Nikitins and Stewart McCallum were appointed Joint and Several Voluntary Administrators of EncoreFX (NZ) Limited on 30 March 2020.

Any queries regarding the Administrations should be directed to encorefx@au.ey.com.