The Australian dollar was lower against the US dollar on Tuesday afternoon, erasing an earlier bounce to take the currency back toward decade troughs as coronavirus fears resurfaced within a few minutes of trading on Wall Street.
AUD/USD was lower by 3 pips (-0.28%) to 0.6598 with a daily price range of 0.659 to 0.662 as of 3pm GMT.
AUD/USD slid below 0.66 in early deals but failed to make a meaningful push below 11-year lows made on Monday. Weekly losses stand at -0.45%.
AUD/USD has been tracking the movements in global stock exchanges
A modest relief rally in Asia and Europe had helped the Aussie bounce but opening declines on Wall Street saw the exchange rate return to neutral.
Relief set in when some Chinese provinces cut virus emergency levels but the rising number of cases in Europe, now including Southern Italy have seen markets rollover. Official numbers from China would suggest a plateau in the number of cases but investors have lost faith in their validity and are instead focusing on survey data from businesses and the reaction from governments.
The US dollar
Markets are still twitchy because of the sheer uncertainty about what the coronavirus is doing to consumer behaviour and business investment decisions. Today there were some more signs the US economy might be being affected. Although housing numbers showed improvement because of low US interest rates, more recent manufacturing data missed expectations.
The shock fall in the Richmond Fed manufacturing index for February to -2 when consensus was for a smaller drop to 16 from 20 is another wake up call. Nonetheless despite the evidence the US economy has been negatively affected by the coronavirus, the dollar is still acting as a haven. Supply chains have already been weakened and may take some time to be restored as businesses seek to resume activity with Chinese suppliers but also diversify to new ones to protect against future issues. The government in Beijing seem to understand this and are encouraging low risk regions in China to remove travel restrictions and resume normal activity.
