Australian dollar completes virus recovery

Financial and commodity markets analytics

The Australian dollar has now completed in what some are calling the “coronavirus recovery” which means it is back to levels seen before the virus took hold of the global economy which saw some currencies such as the Aussie face major volatility fall to multi decade lows.

Analysts say Australia’s response to the deadly virus was swift and effective which included cancelling international travel, closing internal borders and in essence, locking down most of the nation which immediately contained the spread of the virus and as of today there are virtually no new cases reported.

Probably the best news for Australia is that China also made drastic moves to defeat the virus which seems to have paid off and now the world’s second largest economy is reopening for business and it is only a matter of time before they resume purchasing Australian goods and commodities such as Iron ore, the country’s biggest export.

"The fact the Chinese economy has come out of lockdown and economic activity is clearly improving, that's been supportive for iron ore prices," said NAB senior FX strategist Ray Attrill.

"The impact of that, China leading and being at the vanguard of post-pandemic recovery, has directly positive connotations for the Aussie, assuming we don't get into a more protracted trade dispute."he added.

Looking ahead, there are some major challenges facing the Australian economy to avoid a recession and any further recovery in the Aussie dollar such as the ongoing tensions between the US and China over such issues as Hong Kong’s self right to govern and calls for an inquiry into the way the Chinese handled the coronavirus outbreak which Australia backed.

The American government has even threatened sanctions against China over the way it handled the coronavirus and the Hong Kong issue which would hit the Chinese economy hard just as it was beginning to recover.

"We're still being a little bit cautious," Mr Attrill said. "The war of words between the US and China has ramped up and the Chinese currency has been under pressure, the Hong Kong dollar too, so there's still some big clouds on the emerging market horizon." Mr Attrill said.


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