Currencies all over have been volatile all over the world, largely due to the current situation. The pandemic has led to a decline in tourism and with it, economic growth has been stagnant. Certain countries that depend on tourism are entering into a state of financial instability. However, Australia has still managed to evade this oncoming economic crisis with the rising dollar.
Despite Governor Philip Lowe of the Bank of Australia saying that the Australian dollar is currently overvalued, the currency has surged a solid 24 percent since its dip in March - around the height of the pandemic. He predicts that the impact of this virus will continue to affect the industry and financial stability for years to come. He continues by stating that the world will be a shadow of what it used to be and will continue to be that shadow until “fiscal reforms and technological innovations”.
A problem with the rising dollar is that it might not be an attractive investment and their high value might deter its growth. As expected, the Australian dollar wavered after it’s all time high on Wednesday. The currency has gone back to a 0.70 level.
Professional brokers think that the Australian dollar is unlikely to break its current trajectory but if it does, the trend might stay stagnant for an extended period of time, up to a few years. However, those over at FXEmpire are confident that it will drop to the 0.6675 point.
There’s no denying that the state of the financial world is strongly affected by the coronavirus. While there are certain industries that are seeing an increase in sales such as YouTube, Netflix, Amazon Prime, Disney+ and other streaming services. However, Australia is not just affected by the pandemic. They are also tied to the impending trade war in America and China.
The younger generation of Australians might wonder why they continue to align themselves with Americans when they have brought nothing but trouble to their economic shores. While this trust might not directly affect their economy, the continued pressures might inadvertently strain relationships on both sides, resulting in a problematic situation for Australia.
If America loses Australia’s support, it might affect the Australian economy negatively since the two are intrinsically linked. In the meantime, China has played a large part in helping Australia develop and grow their economy through trading. If they were to pull out and trade with another country, Australia will experience a large dip in demand. Many of Australian’s youth are siding against America, questioning their beliefs and going against them politically. This might go on to reflect economically as well.
Until such time the friction between China and America dies down, the Australian economy will remain affected by the current affairs of the two countries. The economy is also largely dependent on the state of the world and it will not be able to fully stabilize until a vaccine for the coronavirus is created, to reinstate confidence in travel, as well as trading.
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