Happy Valentine's Day fellow foreign currency lovers. How lovely that you are taking some time out of your loved-up day to read our article, we <3 you too. If you are in need of a last-minute gift for your Valentine, be sure to check out our gift guide. It's bursting with gifts perfect for the foreign currency romantics among us.
Unfortunately, Cupid's arrow missed the Aussie dollar this week, or maybe it hit it at a wrong angle causing the AUD to crash to an 11 year low. Ouch. The low came as a result of the compounding effects of the bushfires, drought, Coronavirus and continued slowing in the domestic economy. While it does suck for Aussie travellers heading overseas, it is the perfect time to sell back any leftover foreign currency you may have laying around. Here's hoping it also encourages tourists to visit Australia, especially those towns impacted by bushfires, and give the economy a little boost. Alright, let's rip off the bandaid now - currently, one Aussie dollar will buy you:
What impacted the Aussie dollar this week?
This week the core consumer price index (CPI) figure for January was released, showing a rise of 0.2% and an annual increase of 2.3%. The Federal Open Market Committee's inflation target is set at 2%, so recent CPI figures are a sign of the economies good health. However, it is worth noting that the Fed's preferred inflation gauge is the personal consumption expenditure (PCE) deflator, which remains below 2%.
Either way, this news was positive for the US economy and boosted the value of the USD as a result.
Currently, the value of the Aussie dollar is being driven by concerns surrounding the Coronavirus. Yesterday the World Health Organisation announced an extra 200+ deaths and 14,000+ cases of Coronavirus. An official stressed that this didn't mean the virus was spreading faster. Instead, the numbers were backdated weeks after more accurate screening for the virus. Alas, it didn't do much to quell market concerns that China may have understated the number of those infected by more than 100,000.
In addition to this, Scott Morrison has extended the Australian travel ban for tourists entering from China for another week after the initial 14-day ban is set to expire on Saturday. While the ban is obviously in place to prevent further spread of the virus, it will prolong the negative impact on the Australian economy and, in turn, the AUD.
The AUD is considered a 'risky' investment, and its value thrives in 'risk-on' markets where investors feel confident. The current global climate does not bode well for a risk-on market, hence the decreasing value of the AUD. Instead, markets are flocking to safer investments like the USD, JPY and CHF. While the AUD did react slightly to the updated figures from the WHO, the decline was not as sharp as otherwise expected.
The Reserve Bank of Australia expects the main economic effects of the Coronavirus will be contained in the March quarter before things rebound later in the year. RBA Governor Phillip Lowe even went so far to say that Coronavirus aside, the Australian economic outlook is improving.
Only time will tell how the Coronavirus situation and value of the AUD will pan out. What we do know now, is that if new data emerges showing a lack of stabilisation or spread of the virus, it will spell bad news for the Chinese economy and, in turn, the Aussie dollar.
If you're in the market to grab some foreign currency, get peace of mind by adding Rate Move Guarantee to your purchase in-store. It's free, and if the rate improves within 14 days we will refund the difference*!
Enjoy your Friday, lovers.
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