2019-nCoV and AUD

With the recent outbreak of the Chinese coronavirus, traders are looking for clues about the market reaction at the time of the last such an event happen. This has helped analysts from the Australian and New Zealand Banking Group (ANZ) report to mention the Australian dollar (AUD) response to the World Health Organization (WHO) statement on the severe acute respiratory syndrome (SARS) virus.

A coronavirus outbreak in Wuhan, China has raised many questions about the impact of SARS on Australia in 2003.

In doing this, we by no means mean that we believe that the outbreak in Wuhan will unfold in the same way as SARS. The World Health Organization (WHO) issued a SARS warning in March 2003. By looking at the rate chart for that year, you can see the sell-off that followed in the next week or two.

This seems difficult to understand for a market accustomed to treating deflationary shocks as safe-haven assets. For most of the time SARS has been a focus, the Australian dollar has tracked the path the US exchange rate has taken. The divergence between the Australian dollar and the US dollar began in the second half of 2003 because it is clear that the RBA is likely to return to the tightening cycle that began in 2002.

#TradeComment#  #ChinaCoronavirusOutbreak#