New Zealand Dollar Remains Under Pressure from Virus Outbreak

New Zealand Dollar Exchange Rate: Investors Flee Leaving NZD Behind

The New Zealand dollar continues to remain under pressure from the coronavirus as the trading week heads into the mid-point. With the number of cases rising each day across the globe, the risk-sensitive currency has only seen downturns since the outbreak began in Wuhan, China. The market’s risk sentiment shows little signs of a recovery which means the risk-correlated NZD is going to remain trading at the bottom of the pile. NZD was down 0.6% to $0.6297 on Monday, then falling further on Tuesday as the fears of the COVID-19 virus remain heightened.

Global Fears Keep Pressure on the NZ Dollar

The NZ dollar’s position looks unlikely to change until the markets risk sentiment returns. But as the virus looks to be taking over the globe with its persistent spread which originated in China, the chance of investors taking risks looks very unlikely. Government officials around the world are taking preventative actions to combat the spread of the disease, but in doing so a side effect of weaker economic figures is likely to be observed. For example, Italy has now closed its borders, putting the entire country on lockdown and schools in the country have been closed for the foreseeable future. Acting such as this may help contain the virus but the lack of movement of both individuals as workers and freight is likely to have a damning effect on the countries economic output in the months to come. It is not only Italy who this will affect, with some governments like the UK warning that the same measures may need to be taken if the outbreak progresses further.

Coronavirus Cases in NZ Are Low but Impact Is Likely to Be Huge

The number of coronavirus cases in New Zealand is still in the single figures, but the market still worries that the impact of the disease will still be large on the Kiwi currency. This is largely due to the significant trading links New Zealand has with China. As the country is still on high alert, China’s economic demand and output remains battered. With China being one of New Zealand’s main trading partners, the NZ exports will take a hit as the Chinese economy remains subdued.

Meanwhile, reports on Wednesday have noted that New Zealand’s government is considering extending travel restrictions to more countries outside China and Iran, with the new restrictions possibly including Italy and South Korea. As the fears of the virus remain heightened, the NZ dollar is very likely to remain undesirable to investors for the rest of the first half of 2020.

If you’d like to discuss these factors and how they could impact an upcoming currency transfer, feel free to get in touch with me, Tom Holian, using the form below.