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Euro to Australian Dollar Exchange Rate Recovery Continues as ‘Second Wave’ Fears Hit Markets

Euro to Australian Dollar Exchange Rate Up as Beijing Reports New Coronavirus Cases 

A modest rise in demand for safe haven currencies last week left the Euro to Australian Dollar (EUR/AUD) exchange rate gaining. Since markets opened this week, the pair has continued to benefit from this movement due to the latest coronavirus news. 

After opening last week at the level of 1.6206, EUR/AUD briefly dipped before jumping higher. EUR/AUD ultimately climbed almost two cents, closing the week at the level of 1.6397. 

While EUR/AUD struggled to hold the week’s best levels, it has returned to hover around those highs since markets opened today. At the time of writing, EUR/AUD trends close below June highs of 1.6573. 

Still, investors are awaiting more solid coronavirus developments before making the switch to safe havens. The Australian Dollar (AUD) had been highly appealing during the risk-on run. If risk-sentiment returns, the ‘Aussie’ may prove resilient. 

Euro (EUR) Exchange Rates Benefit from Safe Haven Demand amid Coronavirus Fears 

The Euro has seen lasting strength lately. It has benefitted from market optimism about the EU’s handling of the coronavirus pandemic. This means it has benefitted from both risk-off and risk-on movement in some way. 

Risk-sentiment has been weaker since last week. However, due to concerns about the US economic outlook, the US Dollar (USD) has struggled to benefit from safe haven demand. Instead, investors have been opting for its rival the Euro. 

According to Analysts from ING: 

As long as there is not too much back-peddling on this issue, the positive re-assessment of Europe should continue – including the easing of lockdowns – and the Euro should prove a good alternative to the pressured Dollar. 

With risk-correlated currencies like the Australian Dollar under pressure from worsening coronavirus fears, the Euro remains appealing as a safe haven this week. 

Australian Dollar (AUD) Exchange Rates Hit by Fears of Coronavirus Second Wave 

When markets opened this week, news emerged from China that a jump in new coronavirus cases had been reported in Beijing. 

The news caused fears of a coronavirus ‘second wave’ to surge. As markets began to fear that the virus could spread in China again and hurt its economic activity, investors became less willing to take risks. 

As a currency correlated to risk, the Australian Dollar was hit hard by this news. After weeks of strong performance, the Australian Dollar continued to be sold from its best levels while investors sought safer investments. 

According to Yukio Ishizuki, Foreign Exchange Strategist at Daiwa Securities, the move was a rush but it may still be temporary: 

‘There’s talk that hedge funds and other short-term speculators came into the market early to sell the Australian dollar because of the new infections in Beijing, 

Hopefully this will not be a big outbreak, and this downward move will not last long.’ 

Euro to Australian Dollar (EUR/AUD) Exchange Rate to Closely Watch Coronavirus Developments 

As the Euro is benefitting from market safe haven demand today and the ‘Aussie’ is hit by risk-aversion, this could remain a theme this week. 

Markets are now closely watching for further developments in coronavirus infections. In particular, signs regarding how likely a second wave of infections could be in major economies. 

If the EU’s handling of the virus continues to impress investors, the Euro is likely to remain a beneficiary of safe haven demand. 

On the other hand though, if second wave fears soften at all, the risk-correlated Australian Dollar could regain some of its recent losses and firm again. 

Australian Dollar investors are also highly anticipating tomorrow’s Asian session, when the Reserve Bank of Australia (RBA) will publish its latest meeting minutes. 

If the RBA minutes continue to rule out the possibility of negative interest rates, the Euro to Australian Dollar (EUR/AUD) exchange rate could slip.