AUD/USD recovers swiftly from 11-year lows, back around mid-0.6500s
- AUD/USD plummets to over 11-year lows on concerns over the uncontained spread of coronavirus.
- Collapsing USD bond yields added to the recent USD bearish pressure and extended some support.
- Hopes of a stimulus from domestic government provided an additional boost to the Australian dollar.
The AUD/USD pair managed to recover over 200 pips from an early flash crash lows to fresh 11-year lows and was now seen trying to stabilize around mid-0.6500s.
Following a modest bearish gap opening on the first day of a new trading week, the pair witnessed some aggressive selling and nosedived to the 0.6300 round-figure mark amid growing worries about the uncontained spread of the deadly coronavirus.
A combination of factors extended some support
Market concerns were further compounded by a plunge in crude oil prices and weighed heavily on the global risk sentiment. This was evident from a selloff across the global equity markets and drove flows away from perceived riskier currencies – like the Australian dollar.
The global flight to safety was further reinforced by collapsing US Treasury bond yields, which aggravated the recent bearish pressure surrounding the US dollar and extended some support to the major. The aussie was further supported by hopes of a stimulus package from the government.
It is worth reporting that Australian Prime Minister Scott Morrison revealed on Monday that his government is considering a Kevin Rudd-style cash handout as part of its multi-billion-dollar coronavirus stimulus package to keep the economy going and people in jobs.
The pair jumped back above mid-0.6500s, albeit lacked any strong follow-through and was still down around 1.5% for the day. As investors assessed the economic impact of the virus outbreak, a relatively thin economic docket seems unlikely to provide any meaningful impetus.
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