Which currency will be hit most in another wave?
Credit Agricole CIB Research flags 2 headwind factors for the USD in the near-term.
“The impact of the new virus variant omicron on individual G10 currencies will depend on two key factors in our view. The first
is the advancement of their respective vaccination campaigns and the
level of the already existing lockdown restrictions. In turn, these can
determine Covid’s impact on their relative economic outlook. The second
factor is the degree of policy normalisation that has been already
priced in for each of the currencies. Indeed, the omicron variant could
keep threatening policy divergence trades, hurting FX carry-investment
while helping funding currencies,” CACIB notes.
“A G10 ranking based on these criteria suggests that the USD could be the most vulnerable currency given the US’s relatively low vaccination rate and still non-negligible lockdown restrictions in place,” CACIB adds.
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