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Australian dollar makes rebound, but pandemic fears continue

Posted: 24 March 2020 5:38 pm
News

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Coronavirus uncertainty reigns in the markets, overshadowing small gains.

The Australian dollar has made a confident opening on the markets this week, rising back above $0.59 after plunging within a hair of $0.55 last week.

It's valuable breathing room, but analysts remain unconvinced as the world continues sloping into coronavirus lockdowns and manufacturing disruptions continue.

With so much global uncertainty, no one is out of the woods yet, especially not the Aussie dollar.

Bread alone

Australian government stimulus packages and coronavirus relief initiatives have brought some relief to households and small businesses, but they can't address the global slowdown that's still rolling around the world.

"The Commonwealth Government’s package, which will create a budget deficit of at least $30bn in 2019-20 (and more in 2020-21), is targeted at low income households, sole traders, SMEs and airlines. It will make an important difference, but will not offset the economic consequences of the pandemic," said analysts at ANZ Bank.

These key economic consequences include reduced manufacturing in response to virus fears as well as generally reduced consumer spending.

Given Australia's emphasis on raw materials exports, the Australian dollar has traditionally lined up with commodities, but as business slows around the world and more countries enter lockdown, the worst may be yet to come for the Aussie dollar.

Rebounded?

The Australian dollar's rebound may have been a natural readjustment following its recent beating, and the result of technical indicators saying it was simply oversold.

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AUDUSD chart by TradingView

While there have been sporadic reports of manufacturing re-commencing in China, it's not clear how far it can go, especially as other key Australian industry segments such as tourism and education remain locked down.

The global situation remains tentative and uncertain, which may manifest as increased volatility in the FX space.

For the countless millions of people who rely on remittances to survive, the roiling forex markets present another hazard.

At a time like this, some people who send remittances to family outside of Australia may use forward contracts to lock in rates against further drops.


Forex news

Other ways to save money

Are you worried about your finances during this time? Don't forget to review your bills - spending a little time on admin, could save you over the weeks and months to come.

Here are some guides on how to save some money on your daily expenses. There are plenty of things you could do, from checking your energy rates, switching to a low-interest credit card, or simply dropping parts of your insurance that you don't need.

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