AUD/USD: Plunges New Decade Depths over COVID-19

The Australian dollar was lower against the US dollar on Monday with Australia seen as one of the economies most at risk from a China-induced global pandemic from the COVID-19 coronavirus. The US dollar mostly gained in a flight to quality but the shock contraction in the United States service sector has put its haven status on notice.

AUD/USD was lower by 19 pips (-0.28%) to 0.6609 with a daily price range of 0.659 to 0.663 as of 3pm GMT. The currency pair slipped to new 11-year lows in early trading but got a lift when there was no follow-through back above the 0.66 level.

The AUD down amid calls for RBA to cut interest rates

The dollar has gained +1.5% versus the Aussie in the last two weeks and is up 5.9% year-to-date. The Aussie has been pressured by increasing calls for the Reserve Bank of Australia (RBA) to cut interest rates on fears the Australian economy is faltering thanks to the long seasonal bushfires and the COVID-19 outbreak. The curbs to tourism from China and the impact that has on surrounding countries like Australia took another hit from the news that China will postpone in annual National People’s Congress (NPC) meeting.

A sudden rise in the number of cases in South Korea impelled Australia to raise its travel advisory to South Korea and Japan. South Korea cases of the coronavirus now total 833. In mainland China there is now a total of 77,150 infected with 2592 deaths as a result.

The USD high after US Treasury comments on US-China trade

The US dollar benefitted slightly after US Treasury Mnuchin said at the G20 there is no material impact from coronavirus on the US China trade deal for now. Even if the trade deal remains unaffected, business activity has already taken a hit and markets are pricing in a lower growth, low inflation environment.

US 10-year Treasury yields fell below 1.4% prompting Warren Buffet to say it doesn’t make sense to lend to the US government at that rate of return. Bernie Sanders winning the Nevada Democratic Party caucus, keeping his frontrunner position to be the party’s candidate for the Presidency may be adding to the negativity in markets.

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