It’s been another interesting week in financial markets, with the biggest news in Australia being the bungled attempts by the Federal Government to secure a reliable supply of COVID-19 vaccinations.
The situation has become so dire that the major vaccine we were planning on using, produced by AstraZeneca, is now no longer going to be used in most cases for people under 50, whilst according to some reports, doctors are refusing to administer it given their concerns about potential legal liabilities.
Whilst we appreciate the politics around COVID-19 itself, and the vaccine rollout are contentious, they are worth mentioning in the context of their financial market impact, as this is relevant for all investors, including clients at Australian Diamond Portfolio.
To that end, the challenges Australia is facing on the vaccine front are beginning to show up in foreign exchange markets, with the Australian dollar beginning to weaken versus the USD in the last few weeks.
After topping out at USD 0.797 in late February, the AUD has fallen just over 4%, and closed last week at USD 0.761.
Whilst that is by no means a large fall, it could well be a sign of things to come, with the local currency at risk of a more meaningful pullback in the months ahead.
It’s worth remembering of course that in March last year, the AUD was only trading at USD 0.557, with the local currency almost 40% higher than it was just over a year ago, with recent moves in the FX rate seen in the chart below.
AUD vs. USD FX Rate
That strength in the AUD, which is unlikely to persist, is one of the reasons clients at Australian Diamond Portfolio are busy adding to or beginning their diamond portfolios now.