Commodity Currencies And Safe Havens React In The Face Of Covid-19

After the signing of the phase one trade deal and Boris Johnson winning the U.K. general election, most investors were looking forward to a mild economic recovery stepping into 2020 with reduced uncertainties in the market.

- Andrew Leong

However, the Lunar New Year brought a surprise outbreak of coronavirus in China, with the global death toll climbing over 2,900, far higher than that during the 2003 SARS outbreak. Singapore raised the Disease Outbreak Response System Condition to orange after signs of domestic community spread. This month, we walk you through the coronavirus’s impact on the financial market and what you should be aware of in times like these.

Commodity currencies: panic in times of uncertainty

In the past two months, commodity currencies took a back seat as risk aversion surged with the COVID-19 outbreak showing no sign of slowing down. Investors used the AUD as a proxy for China’s growth, given that China is one of Australia’s largest trading partners. As such, downsides in the AUD extended alongside the coronavirus woes. To date, there have been over 87,000 COVID-19 cases diagnosed worldwide. With more than 50 million people in China locked down as the country steps up efforts to contain the exponential growth of the outbreak, it is no wonder that the outlook of the global economy remains bleak. Looking ahead in March, the progress of the outbreak remains a crucial driver of market risk sentiment. The absence of signs that the epidemic has peaked or news of potential vaccines could cause the commodity currencies to tumble lower.