THE Aussie dollar is more or less recovered from COVID-19 impacts, which saw the currency plunge to below US57c in March.
The dollar went as high as US66.75c during trading earlier today, currently sitting at 66.5c – a full US10c higher than its March 19 low-point, after the COVID-19 economic shock set-in.
The recent rally (see image of graph from beef Central’s home-page dashboard) comes amid rising optimism about economic outlook, being driven by the slow and steady easing of lockdown measures, particularly evident in the US, Japan, Korea and other key beef customer countries, as well as Australia.
The local currency has now risen more than 15 percent from its March lows, after investor panic around coronavirus triggered a rush towards safe-haven currencies, like the US$.
Today’s currency rate sits at levels not seen since February, before COVID-19 came on the world radar. Recent gains have come as governments across Australia take their first steps to wind down social distancing measures. The rally also reflects more positive investor sentiment, analysts say.
While a rising A$ creates additional headwinds for Australian beef exporters, making our product more expensive against competitors on the world stage, today’s currency rate at US65.5c is still well below US cross-rates seen throughout 2019.
Weakness in the US$ overnight reflected a strong rally in US stocks, analysts said.
Last week, Rabobank Foreign Exchange strategists said there was a chance the A$ recent run of appreciation might run into trouble, leading to a decline in value over the next one to three months.
Rabo sees Australia’s exposure to China as being key to the outlook for the currency, saying that while the recent recovery in global equity and commodity markets has proven supportive, rising trade tensions with the world’s second-largest economy could prove problematic.
Any impact on growth in China would in turn likely impact on demand for Australian exports, which would bode negative for the Aussie dollar, Rabo said.
“Market appetite for risk has improved through the last week, as countries around the world begin loosening lockdown and social distancing restrictions,” a recent currency report said.
The report added that Australia’s response to coronavirus – perceived as one of the more successful efforts to flatten the curve – could mean good news for economic recovery down the track.
“Our ability to combat the virus without going into full-scale lockdown and level 4 restrictions means the domestic economy is well-placed to rebound in the wake of the pandemic,” it said.
“And as Asia, led by China and Taiwan, appears to be kick-starting their own economic engines, there is hope the Asia/Pacific region could recover faster than other key economic areas.”
CommSec chief economist Craig James said there were early signs of workers rejoining their employers. “That creates potential for higher incomes, spending and confidence,” he said.
“Australia has been a relative global outperformer when it comes to containing the virus,” Mr James said. “But it’s too early to claim victory, as a restart of the economy may see virus clusters continue to emerge over the winter months.”