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#1 05-01-2021 07:56:06

johnedward
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From: Paris - France
Registered: 21-12-2009
Posts: 3068
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How will AUD and NZD pairs perform in 2021?

How will AUD and NZD pairs perform in 2021?


The dominant theme in the forex last year was the decline of the USD. While the market's initial reaction was to buy the U.S. dollar when stock markets collapsed, the Fed made sure there were enough dollars in the system for everyone.

From that point on, the decline of the U.S. dollar did not stop. Since the currency dashboard is made up of currency pairs, exchange rates indicate the value of one currency against another. In other words, if the dollar has declined, how have the other currencies performed?

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AUD and NZD: the strongest fiat currencies last year

Last year will remain the year of the big virus. It is therefore useful to divide the year into two parts, before and after the pandemic fully appeared.

If we use such a measure, the AUD outperformed all other major currencies, rising 9.6 per cent for the year and 40.0 per cent from the lows of last year. In other words, buying last year's lows has done wonders for the Australian dollar bulls. The same goes for the NZD, which ended the year up 31.5%, outperforming the euro and even the Mexican peso - one of the other strongest currencies of the year.

Containing the virus

Last year was marked by many interesting events. For example, the price of oil fell below zero for the first time ever. In addition, traders were surprised to see equities reach new highs during the worst economic crisis of all time.

If there's one thing that made sense last year, it was the strength of the AUD and NZD. The 2 countries, Australia and New Zealand, managed to contain the virus to such an extent that New Zealand has been declared virus-free. As the world faced high infection rates, the two struggling economies quickly recovered, and their currencies accurately reflected this. The strength of the Aussie and New Zealand economies can therefore be said to have been accurately reflected in the AUD and NZD results in 2020.

Looking ahead, the world seems poised to catch up. Huge vaccine efforts can help other economies catch up, but don't expect the AUD and NZD to easily give up their gains. Both currencies are also highly correlated to the US stock market in a risk-taking move - as long as the risk-taking environment continues, it is likely that the Australian and New Zealand dollars will continue to outperform their counterparts.

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