On Sunday, Western Australia and the Australian states of Queensland said that they would ease social distancing rules this week. It is because the number of infected people decreased. Thus, it pushed the Australian dollar to a seven-week high of 0.6469 against the United States dollar.
Germany allowed small retail stores to reopen, encouraged by a fall in infection rates. Now large corporations followed suit.
Italy will ease measures of lockdown from May 4.
Moreover, alongside with more positive COVID-19 data, those measures have turned investors towards more risky assets. Thus, analysts say that investors abandoned the safety of the dollar. A Reuters index is tracking the United States dollar against other major currencies. Thus, for the first time since Wednesday, it fell below 100.
Since lockdown measures are still in place, some analysts believe the move came too early. Thus, it will take time to return to pre-COVID-10 behavior.
United States
Athanasios Vamvakidis is the global head of G10 FX strategy at Bank of America Merrill Lynch. He thinks that recovery is some way away and remains bullish on the United States dollar.
Moreover, Vamvakidis said that there is a clear trade-off. One choice is to open and see more deaths and more infections. The second choice is to remain closed and kill the economy. Nevertheless, he says that there is no right or wrong, and there is no clear answer. He said that one thing is sure. It is that we cannot eliminate the virus unless we find a cure or vaccine. Thus, we will not have a strong recovery unless the infection remains.
Thus, that is why we are concerned about the market rally we seen in risk assets, continues Vamvakidis. We still like the dollar; we are still risk-off, he says. He says that they believe they yet have not seen the worst off in the market correction.
