The Australian dollar reaches an all-time low of 11 years, while ASX loses $ 48 billion amid fear of coronavirus
- Aussie dollar drops below US 66 cents on coronavirus fears as infection spreads
- More headwind is coming, because a weakening economy can encourage the RBA to lower rates
- ASX drops 165 points or 2.25 percent to close at 6978.3 and sweeps an estimated $ 48 billion
- Aviation, travel, energy: people exposed to coronavirus are spreading the biggest losers
- Gold rises due to a fall in currency, buying in a safe haven, while Israel places Australia in quarantine
The Australian dollar has reached an all-time low of 11 years because coronavirus is afraid to poke a currency that has already become unattractive due to a 10-year drop in interest rates.
The fifth most traded currency in the world fell below US $ 66, partly due to Australia’s position as a major exporter of commodities to China.
Chinese demand for raw materials has fallen because the closure of the corona virus virtually halts production in the Asian economic superpower.
Gold rose when the Aussie dollar fell due to currency weakness and safe port purchases because coronavirus contamination grabbed both the dollar and the stock market on Monday
The Australian dollar fell below the US 66 cents level on Monday. Sydney is 11 hours ahead of UTC, so the waterfalls shown are on Monday, Australian Eastern Daylight Time
The currency decline came after Israel added Australia to its quarantine list alongside Taiwan, Italy, South Korea, and Japan, meaning that travelers flying from Australia to Israel would have to spend 14 days in isolation.
“With the Morrison government canceling Chinese travels for international students, Israel is right to be wary,” wrote MB economist Leith Van Onselen Monday.
“Unlike the Australian government, Israelis place public health above short-term financial interests.”
The coronavirus misery in Australian dollars is exacerbated by an unattractive decade of low interest rates for currency traders who previously drove Japanese carry trade, Bloomberg reported Monday.
Traders borrow yen at almost zero interest rates to buy higher-yield Aussie dollars, earning enough interest to trade.
People line up to buy face masks in Daegu, South Korea on Monday after the SARS-CoV-2 coronavirus cases have risen dramatically. The sudden spread caused the Australian dollar and the stock market to fall on Monday
The S&P ASX 200 index of the 200 largest companies in Australia fell more than 2 percent on Monday
A decade of falling interest rates has caused profit to fall and market sentiment to change.
The trader’s sentiment has now increased to see the Australian dollar as a source of cheap funds – something that was unthinkable five years ago, according to S&P Global Ratings Singapore, Asia Pacific chief economist, Shaun Roache.
“It’s a remarkable change in the mindset for markets,” he told Bloomberg.
DailyFX reported that the Aussie dollar would probably have more headwind for the next Reserve Bank of Australia meeting on March 3, as weaker economic growth forecasts could encourage Governor Philip Lowe to start lowering rates again.
A woman walks past a bank on Monday with the Hang Seng stock index of Hong Kong. Stocks also fell in Asia after an increase in new virus cases outside of China
Predictably, gold rose to record highs in Australian dollars due to both the weakening currencies and the purchase of a safe haven, with the Perth Mint posting a bargain price of $ 2519.58 from Monday afternoon.
The price has risen by $ 147 dollars in just one week.
The Australian Securities Exchange (ASX) also had a fall on Monday with the worst sale since August last year.
The corona virus shock spread to northern Italy, Iran and South Korea has prompted investors to dump shares and wipe out an estimated $ 48 billion of the value of Australia’s listed companies according to the Australian Business Review trading day.
According to the Australian Financial Review, the S&P ASX 200 index of the largest companies in Australia fell by 165 points or 2.25 percent to 6978.3.
Adam Dawes of Shaw and Partners said the next level of support for traders is expected at 6850 points, the Sydney Morning Herald reported.
Airlines and travel companies that are considered the most directly exposed to the coronavirus fell the most.
Flight comparison company Webjet fell 8.3 percent, while Qantas fell 7.5 percent and Flight Center closed 4.94 percent on the day.
The fall in oil prices weighed on the energy sector, which was one of the biggest losers with 4.2 percent in the early afternoon.
Woodside closed 6.4 percent while Santos fell 3.3 percent.