Both the Chinese Renminbi as well as the Pacific G10 currencies (AUD and NZD) are benefitting quite clearly from the fact that several cities in China decided to ease coronavirus curbs. Nonetheless, excessive AUD and NZD are not justified, according to economists at Commerzbank.

China’s leadership is reacting

“Corona measures are being eased more quickly than one might have assumed even last week. In particular as the introduction of these measures had initially caused CNY, AUD and NZD weakness the FX market had potential for a correction. I completely agree with that, in particular as I was critical about the initial market reaction. At the same time, I caution against throwing out the baby with the bath water.”

“I know that everyone blamed the corona lockdowns (and fears of them) for weak growth in China. However, even if we see a reversal in China’s lockdown policy that does not mean that everything will be happiness ever after. That means that excessive AUD and NZD strength is not justified.”