How the Coronavirus is impacting the Australian Dollar

In short

1. The Coronavirus or COVID-19 has had a negative impact on the Australian dollar in many different ways
2. Markets are reacting in a similar way to the SARS outbreak
3. As the threat increases, the AUD is likely to remain under pressure

The Australian dollar has once again fallen on fears of the coronavirus spreading further. Here's how it has performed in the last week:

• The AUD to USD exchange rate is down 1 cent to 0.6764
• The AUD to EUR exchange rate is down 1% to 0.6137
• The AUD to GBP exchange rate fell to a 5 week low below 0.5200
• The AUD to JPY exchange rate is down almost 3% to 73.82
• The AUD to NZD exchange rate is fairly steady at 1.0333

How has the corona virus impacted the Australian dollar?

Since news of the virus broke, markets have taken a similar road to the SARS virus in 2003. In most cases, it's been negative for the Australian dollar the Chinese Yuan.

1. Risk appetite has fallen - While the virus remains unconfined, markets are avoiding risk. This means that so-called 'safe-haven' currencies like the US dollar and the Japanese Yen tend to appreciate (go up) because there is higher demand for them. Other currencies that are considered risky like the Australian Dollar tend to weaken.
2. Commodity prices - The economic distribution to the Chinese economy will no doubt reduce their demand for Australian exports like iron ore and coal. Prices of these commodities have fallen and because the AUD is tied to these prices, it has been dragged lower too
3. Tourism and education - Chinese travellers now account for about 15% of tourists in Australia with 772,752 visitors arriving in 2019. Travel restrictions as fear over flying will have an impact on tourism in the short term and education over the long term. This once again is a negative impact for the Aussie dollar.