AUD/USD: Dollar Flat vs Aussie as US Inflation Rises

The Australian dollar was little changed against the US dollar on Thursday afternoon as a reflection of the mixed sentiment towards the coronavirus and likely impact on the Asia-Pacific region. The dollar was supported by US inflation statistics that came in ahead of expectations.

AUD/USD was higher by 5 pips (+0.08%) to 0.6741 with a daily price range of 0.67 to 0.674 as of 3pm GMT. The currency pair turned lower in the day but stayed above 0.67 and later recovered to a position of little-changed. Over the week, the exchange rate is higher by 1.03%

AUD down as coronavirus appears more contagious than expected

Overnight news that the coronavirus appears to be much more contagious than previously known saw the Australian dollar fall. The AUD/USD currency pair has been a barometer in markets for risks from the virus because Australia is exposed economically to what happens in China and the United States is thought of as a haven when there is uncertainty.

In the early hour’s markets were adjusting to news that the number of coronavirus cases had shot up significantly. 242 deaths from the Covid-19 virus were recorded in Hubei, China on Wednesday. It is the deadliest day of the outbreak and a sharp turnaround after the number of cases appeared to be trailing off on Tuesday. The number of infections increased at a similar rate to total nearly 60,000.

Chinese authorities seem to have been understating the number of cases up until they started a new methodology of diagnosis on Wednesday.

US dollar benefits from US strong status facing coronavirus outbreak

The Greenback is benefiting from another set of strong data as well as its status as a haven asset during the coronavirus outbreak. On Thursday, inflation, a key measure of price stability which determines the level of interest rates in a country rose in the United States. US CPI increased to 2.5% year-over-year in January from 2.3% in December and above economists’ forecasts of 2.4%. The Federal Reserve sets an inflation target of 2%, so the further inflation rises beyond 2%, the more likely they will respond by hiking interest rates. However, a US rate hike is not currently expected by markets because of threats to growth like the coronavirus.

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