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Three Countries That Effectively Contained Covid-19

Australia, New Zealand, and South Korea are among the few countries that managed to contain the spread of the coronavirus – at least for now.

The milestone has boosted investor confidence, and now their currencies are showing signs of recovery.

Their economies are reopening, and currencies significantly rose from earlier this year when the outbreak ravaged the Asia Pacific region.

On the contrary, their neighbors are still struggling to contain the pandemic.

According to Kathy Lien, Australia and New Zealand have been effective in controlling the Coronavirus and ready to restart their economies.

Kathy is the managing director of foreign exchange strategy at B.K. Asset Management.

In Australia, the Australian Dollar (AUD) soared despite weaker PMIs following PM Morrison said Australia was headed for a Covid-safe economy.

Purchasing Managers Index (PMI) is an economic indicator measuring how well the manufacturing sector is performing.

These countries are ready to restart their economies after effectively managing Covid-19. It means they’re far ahead of the U.S. in terms of economic recovery, which wildly and positively affects their currencies.

Currencies Recovering in Response

There is also a perception that Asia has controlled the virus more effectively than Europe and the U.S. The perception also strengthens the Australian dollar. Tapas Strickland said in a Tuesday note on a recent strengthening of the AUD. Tapas is the director of economics and markets at the National Australia Bank.

According to Johns Hopkins University data, the U.S. has recorded the highest number of reported cases globally, with at least 988,000 infections and 56,200 deaths.

France, Spain, Italy, and Germany are other countries the pandemic has badly hit. Globally, there are more than 3M confirmed cases and at least 211,159 deaths.

Also, New Zealand and Australia have a majority of their import destinations emerging from lockdown sooner than Europe and the U.S. John Bromhead wrote in a note on Friday.

John is the Foreign Exchange Strategist at ANZ Research.

China is the largest trading partner with both countries.

China has resumed production as reported cases slow down to single-digit levels. They have not had any new deaths for more than a week now. China reported its first Coronavirus case in December 2019.

New Zealand and Australia are relatively in a strong position. Both have strongly contained the virus sheltering relatively high shares of primary industries from the consumer-centric slowdowns and strong fiscal responses.

The Australian dollar

Last year, the AUD was one of the region’s worst-performing currencies, following concerns over the slowing economy and that of China.

China is its largest trading partner.

At the beginning of 2020, the AUD was as high as $0.70 against the USD. But it plunged to a low of $0.5798 in March as the spread of the virus took hold.

Since then, the AUD has surged 11.4% and last traded at $0.6460.

Australia acted swiftly when the outbreak reached the country. They closed off all borders and imposed movement restrictions.

This week their daily new cases came down to single digits, and Australia may start easing some restrictions.

As of April 27, Australia has a total of 6,721 cases and 83 deaths, according to John Hopkins data.

The New Zealand dollar

In mid-March, the NZD was at a low of $0.5666. It has gained 6.4% to above the $0.60 level.

On Monday, the country eased its alert levels, allowing gatherings of up to 10 people. It also permitted the reopening of businesses even though they cannot physically interact with customers.

Previously, New Zealand had put its highest alert levels, meaning no gatherings and all companies providing non-essential services closed.

New Zealand has successfully managed to keep the numbers low compared to its neighbors in the region. They decisively locked down the country as soon as they reported the first case.

According to Johns Hopkins, New Zealand recorded 1,472 confirmed cases and 19 deaths as of April 27.

Korean won

South Korea was the worst-hit country outside of Asia. But now, it’s hailed as a role model for successfully managing the outbreak. South Korea instituted countrywide testing and intensive contact tracing.

Now, South Korea has eased restrictions with their situation a stark contrast globally:

People have returned to their normal lives, going to restaurants, and returning to work.

Its Kospi Index and currency have bounced back. In early March, the Korean won had weakened to levels above 1,270. But it strengthened almost 5% by mid-April as cases became fewer.

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