Daily Commentary BY THE CURVE TEAM –

AUD Sinks as Virus Spreads

31st of January, 2020

The fallout from the spread of the Coronavirus continues as the World Health Organisation upgrades its warning.

Earlier this morning, the World Health Organisation declared that the Coronavirus was now “a public health emergency of international concern.” It comes as the virus continues to quickly spread both in China and to other countries around the world.

Should the spread of the virus not slow, the impact of the virus on the global economy will become far more significant. Border closures, such as the one Russia has just announced, will have notable implications for economic activity.

Australia faces additional exposure, both due to our geographical proximity and strong economic interconnectedness to China. As a result, markets have driven down the value of the AUD, with last year’s lows now within touching distance.

Usually a lower AUD would be a welcomed development as it helps to support the economy. However, given the drivers behind the latest move it is unlikely to be of much help. The RBA should provide more insights into this development as well as the broader outlook next week.

David Flanagan

Director - Interest Rate Markets