Billions of dollars are at stake for the Australian economy. Which industry will be most affected by coronavirus?

The Australian dollar plunged to a 18-year low of 55 US cents as the global economic outlook crumbles under the spread of the deadly coronavirus.

The widely expected emergency interest rate cut to 0.25 per cent from the Reserve Bank of Australia was priced in as the currency hangs tentatively waiting on details of quantitative easing – effectively encouraging consumer spending by printing more money and pumping it into the economy.

The Aussie was buying just 55.10 US cents shortly after lunch, the weakest since 2002.

“The dollar is seen as a proxy for global growth,” Westpac senior currency strategist Sean Callow told news.com.au.

He said most major currencies have been weakened by the continual spread of the pandemic as another 475 deaths were confirmed overnight in Italy, creating a “horrible risk environment” for investors as travel restrictions amplify.

“The Aussie seems to get over punished when the global economic outlook deteriorates,” Mr Callow said.

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IG market analyst Kyle Rodda said the US dollar strengthening against all others was “perhaps the greatest red flag” because it showed others defensive assets had been abandoned as investors retreated to lick their wounds.

“All other safe haven assets have been bypassed for dollars, as the only thing that seems to matter for the market is liquidity,” he said in his note this morning.

“Market participants want cash in US dollars, but there’s not enough to meet the demand.”

Meanwhile, Mr Rodda said investors would be eager to dissect RBA governor Philip Lowe’s explanation for the central bank’s historic rate cut this afternoon, which saw Australia’s cash rate lashed from 0.5 per cent to a new low of 0.25 per cent.

“The devil will be in the detail — so how big this program is going to be, whether they’ll have other measures to try and support the financial system and stimulate economic growth,” he said.

“The impacts will reverberate through the market once we know that outcome.”

The central bank wasn’t scheduled to meet until the first Tuesday of April.

The Australian share market has lost hundreds of billions dollars in the past two weeks and is bracing for further heavy falls as businesses across the country grind to a halt.

RBA CUTS RATE TO 0.25 PER CENT

The central bank followed through with the widely expected move to slash interest rates to 0.25 per cent this afternoon two weeks ahead of the scheduled meeting on the first Tuesday of April.

It’s the first time it has been announced outside a regular meeting since 1997, and is a glaring sign of just how severe the situation is becoming.

History tells us that when an economy is hit by a black swan event, pull every policy lever you have, quickly and hard and this is what the RBA has done today - supporting jobs & incomes and ensuring the ongoing functioning of lending markets. — Jo Masters (@masters_joanne) March 19, 2020

Governor Philip Lowe also announced other measures – including quantitative easing – which are designed to make sure credit remains available to individuals and businesses.

“The coronavirus is first and foremost a public health issue, but it is also having a very major impact on the economy and the financial system,” he said in a statement this afternoon.

“As the virus has spread, countries have restricted the movement of people across borders and have implemented social distancing measures, including restricting movements within countries and within cities.

“The result has been major disruptions to economic activity across the world. This is likely to remain the case for some time yet as efforts continue to contain the virus.

“Financial market volatility has been very high. Equity prices have experienced large declines. Government bond yields have declined to historic lows.

“However, the functioning of major government bond markets has been impaired, which has disrupted other markets given their important role as a financial benchmark. Funding markets are open to only the highest quality borrowers.

“The primary response to the virus is to manage the health of the population, but other arms of policy, including monetary and fiscal policy, play an important role in reducing the economic and financial disruption resulting from the virus.”