Aussie Turns Weak on Vaccination Issues

Following remarks from a top government minister that state borders could stay largely sealed for an unspecified amount of time, queries have been posed regarding when, or even whether, the Australian economy will reach original capacity.

On Tuesday, Health Minister Greg Hunt noted that Vaccination by itself cannot pave way for the opening of economy. Even if the entire population of Australia gets vaccinated, still, there are other issues to look at before opening international borders.

In the meantime, 9 News Queensland reported that journeys abroad will not become common before 2024. Such developments could turn out to be more appropriate for the Australian dollar.

Considering the role of mobility in a globalized world, the trends threaten throwing Australia’s economy in the backseat in the months and years ahead, compared to those who are more likely to follow a vaccine-led route back to normalcy.

Permitting vaccination to determine the path to normalcy inherently facilitates the covid-19 virus to spread at an optimal pace within communities, which will be a difficult change for Australia and New Zealand, both of which have followed a “zero-covid” strategy.

The news comes against the backdrop of a delay in the country’s vaccination program, with the government recently announcing that it will postpone economic growth outlook due to a shortage of supplies and concerns over blood clotting related to AstraZeneca vaccine.

Currently, analysts believe that postponements in vaccination program are going to restrict the Aussie’s uptrend, instead of sparking a sell off. Considering the government’s vulnerability to an increase in Covid-19 infections, nevertheless, the risk balance might rapidly crumble if covid-19 infections rise sharply.

If Australia’s lawmakers want to completely unlock international boundaries, they will almost certainly have to encourage covid-19 to propagate within the population, a scenario that is compatible with a scientifically-based expectation that covid-19 will transform into an endemic.

In an article published by British Medical Journal, Ingrid Torjesen has stated that the SARS-CoV-2 coronavirus cannot be eliminated totally, but will become an endemic, continuing to spread in patches in the years ahead and triggering outbreaks in areas where it had previously been obliterated.

Last weekend, the government temporarily halted the administration of AstraZeneca to those under the age of 50yrs, in accordance with several EU countries and the UK, which has also imposed age restrictions in recent times.

The initiative is an outcome of the blood-clot issue related to the vaccine. Scientists are yet to identify the precise reason behind it.

According to Valentin Marinov, chief of G10 FX Strategy at Crédit Agricole, the country’s vaccination program is dependent on the Covid-19 vaccine produced by AstraZeneca. It should be noted that Australia does have the capability to manufacture AstraZeneca vaccines at the CSL-Seqirus factory (Melbourne), which enabled the country to rollout the vaccine against the backdrop of tight worldwide supply issues.

However, restricting the usage of AstraZeneca’s vaccine has left the country heavily dependent on Pfizer’s vaccine, the only other Covid-19 vaccine which has received approval in the country.

As global requirement for Pfizer’s covid-19 vaccine is likely to increase against the backdrop of problems faced by AstraZeneca and also Johnson & Johnson’s vaccine, Australia’s vaccination program looks shaky.

As Australia stays behind most of the G10 nations in the vaccination race, the pound has been appreciating against the Aussie since the beginning of this year.

Marinov highlights the fact that until now issue of international travel and vaccination program was not a subject of concern for Australia, which has succeeded in limiting the spread of virus within its boundaries.

However, there is a shift in the trend. Marinov pointed out that as per their model, the pace of vaccination, in comparison to the US, is affecting the AUD/USD pair’s exchange rate.
For the time being, the Aussie gets adequate support from Forex markets, which is retaining its concentration on the positive global macro climate, but a rising number of analysts are raising the query of vaccination and apparent shortcomings of the country’s ‘zero covid’ strategy. If this transforms into a crucial factor for the Aussie, downside risks are possible.
At the time of writing this article, the GBP/AUD pair was trading at 1.7860.