The New Zealand dollar continues to hold its weak position as a risk-sensitive currency that has been battered by the rising market fears over the COVID-19 coronavirus outbreak. NZD’s fall was also triggered by its neighbour, Australia. With AUD seeing a decline after disappointing Aussie construction data, its NZ counterpart saw a drop due to the close ties in trading that the two share. NZD (along with AUD) has been pressured for weeks by expectations that the coronavirus’ impact on China’s economy will spread to their respective economies, which would force their central banks to start taking quantitative easing measures much earlier than expected.
Coronavirus continues to pull down the NZD
This morning saw the NZDUSD interbank exchange rate slump down -0.19% to 0.6310. The constant pressure being applied to the risk sensitive currencies like the Kiwi dollar is having a considerable impact on the economy. With no signs of a let-up from the disease as it continues to move west into Europe, investors’ fears are being heightened. Containment measures have been introduced in South Korea and Italy; the market is expecting the global economic impact to widen which can only be bad news for commodity currencies.
Investors steer clear of risk-sensitive currencies and head to US Dollar and Swiss Franc
With the pressure mounting as the number of new cases around the world continues to grow concerning the coronavirus, investors have removed themselves from trading with the risk-sensitive currencies like the New Zealand dollar. Instead, traders now favour currencies like USD and Swiss franc, which have benefited from an influx of traders each time the coronavirus fears have increased. The US dollar is the more favoured of the two ‘safe havens’, with less dependence on Chinese performance for domestic economic success.
Number of cases of COVID-19 rise across the globe, showing no signs of slowing
For NZD, the biggest driver of the currency in the short term will be the coronavirus. With another trading day being labelled a ‘risk-off’ day, the only way is down for the NZD currently. News around the world is unlikely to help NZD’s case as panic has struck the entire world with an increase of cases in South Korea. Officials from South Korea claimed over the weekend that the country is in a state of emergency over the outbreak of the disease, the country has reported 284 more cases of the COVID-19 coronavirus, which has raised the total number of infections to 1,261. The disease has also spread to Italy, which has seen the European country quarantine many towns and villages in its Northern region.
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