The Australian dollar was little changed against the US dollar by Monday afternoon after having given up earlier gains when China announced new stimulus measures to protect its economy from the coronavirus. For now, traders are defending the exchange rate against new decade lows.
AUD/USD was higher by 3 pips (+0.04%) to 0.6716 with a daily price range of 0.672 to 0.674 as of 3.30pm GMT. A 30-pip early gain quickly rolled over as the currency pair again moved to test the 0.67 level, just above 11-year lows.
Last week AUD/USD gained 0.63%.
The Australian dollar
An early bullish response to new economic stimulus measures in China quickly turned sour as investors turned their attention back to the containment of the virus. Last week, the slowing number of new cases of CVOD-19 had offered hope that light was at the end of the tunnel. But as of Monday, the death toll had risen to more than 1,700 according to the World Health Organisation (WHO). The total number of cases is now in excess of 70,000 although still mostly in the Hubei province.
Australia’s strong economic ties to China saw the Aussie initially rally alongside the Chinese yuan, but later turned lower on a lack of conviction. The lower liquidity during the US Presidents Day holiday might have added a technical reason for the failure to build on early gains. For the Australian economy to survive the multiple threats to its economic well-being from the bushfires to the global slowdown to the coronavirus, it might well be necessary for a more accommodative monetary policy and hence traders’ reluctance to hold onto the Aussie.
The US dollar
The dollar was flat to lower against most major currencies on Monday. The uncertainties around the coronavirus COVID-19 are rising again because of the rising number of cases but that is somewhat offset by the aggressive stimulus efforts from Chinese authorities. On Monday, Beijing said it would cut taxes and the PBOC said it would lower medium term interest rates to ease the strain on almost $29B in Chinese bank loans.
