Could New Variant Impact Forex Markets?

Concerning new variant, the latest data from South Africa regarding a recently discovered new Covid-19 variant has caused global health authorities and the scientific community highly concerned.

There is a chance that 1) the variant might be more infectious than the Delta variant and 2) might be vaccine-resistant.

According to the scientists who have sequenced the variant’s genome, it has a high number of mutations to the spike protein (the part the mRNA vaccines are designed to target). According to some in the scientific community, it is therefore the most evolved variant yet discovered from the original virus.

Thus, a major theme in the news on Friday has been various countries around the world re-imposing travel restrictions to South Africa and other nations known to house the new variant.

Investors have been dumping risk assets out of fear that not only travel restrictions will hurt the global economic recovery, but also that the countries may be forced into further lockdowns again if the new variant is as dangerous as feared.

Some foreign currencies, such as the AUD, are thus not a good asset to hold in these conditions, given its historic strong correlation to risk appetite and the Australian economy’s exposure to global economic conditions.