Currencies most exposed to the coronavirus


This health emergency has been driving most
of market movements over the past couple of weeks, mainly through the commodities channel. But why have commodities been so affected
by the coronavirus story? First of all, China is the engine of global
commodities demand. For example, it accounts for 16% of total
oil demand and copper is over 50% and for iron ore, it is nearly 70%. Now the coronavirus poses some material risk
of a slowdown in Chinese economic activity and therefore in demand through those commodities
whose prices have been under severe pressure over the past couple of weeks. From an economic perspective, this chart shows
the estimated impact of a slowdown in Chinese growth of 1% on other economies according
to a study by the IMF. We can notice how geography is a key factor
with Asian countries and Australia appearing particularly exposed. We’ve already started to see an impact on
central bank decisions with rate cuts in the Philippines and Thailand. In the emerging market space, the Russian
rouble, along with the Chilean peso and South African rand appear very vulnerable. So, we suspect there is still more downside
potential for risk-related currencies if the newsflow on the matter doesn’t improve.

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