There is no guaranteed stable profit without lost in foreign exchange investment, but risks can be controlled to minimise the loss rate. Therefore, knowing the right timing to invest is crucial, and good foreign exchange risk management practices can keep investors away from some trading traps. BAYBANNFA will provide global investors some risk protection tips to set investment stop-loss reasonably, stick to logical thinking, don't be controlled by emotions, and manage the risk of each transaction for steady profit growth. So, how will the foreign exchange market dynamics change in March? Here, BAYBANNFA analyzes the foreign exchange trend in March 2021 for everyone.

First, please look at the Australian dollar against the US dollar. In 2021, the Australian dollar may continue to benefit from the recovery of the global economy and the improvement of risk sentiment. With large-scale vaccination of the vaccine, the epidemic may gradually end, inflation will pick up and the US dollar may continue to weaken. These factors are expected to extend continuous support to the Australian dollar. In view of the close trade relationship between China and Australia, China's continued strong economic recovery is also expected to benefit the Australian dollar.In addition, the strengthening of the RMB also act as supports for the Australian dollar.

Australian government’s better control of the epidemic has contributed to the gradual normalization of the economy. Recently, Australia’s economic data has continued to improve: Australia has the highest economic recovery index among the G10 countries. In addition, as of December 2020, 90% of the unemployment caused by the epidemic has recovered.

Analysts believe that the Australian economy is expected to return to pre-epidemic levels as early as the third quarter of 2021. In terms of monetary policy, although the Bank of Australia decided to further increase its quantitative easing program by 100 billion Australian dollars in February, it did not cause significant impact on the Australian dollar exchange rate. The improvement of risk sentiment is the main factor affecting the Australian dollar exchange rate. In addition, the Bank of Australia may also be reluctant to cut interest rates into the negative range. Forecast value at 0.78 for AUD /USD for 0-3 month and 0.81 for 6-12 month. Now, please look at the New Zealand dollar against the US dollar pair.

Similar to the Australian dollar, the New Zealand dollar in 2021 may continue to benefit from the recovery of the global economy and the improvement of risk sentiment. China's continued strong economic recovery and the strengthening of the RMB are also expected to benefit the New Zealand dollar.

New Zealand government has implemented strict lockdown measures at the very beginning of the epidemic, it is expected to be able to return to normalcy soon. New Zealand's economy has returned to its pre-epidemic level in the third quarter of 2020 and it may be the country with the smallest economic contraction in 2020 among the G10 countries.

These factors have resulted in the New Zealand dollar becoming the best performing currency among the G10 currencies in the past six months. In terms of policy, the Bank of New Zealand still has enough easing policy tools, such as negative interest rates, debt purchases and the possibility of easing in the future. Therefore, the upside of the New Zealand dollar may be more limited than the Australian dollar. Forecast value at 0.73 for NZD/USD pair for 0-3 month and 0.75 for 6-12 month. Next, the US dollar against the Canadian dollar pair.

The global economic recovery and the weak US dollar continue to support the rise of Canadian dollar. Although Canada continues to implement lockdown measures, recent local economic data still show significant improvement. As Canada prepares to restart the economy and Canada's fiscal stimulus is expected to continue in the first half of 2021, economic data is expected to rebound further. In terms of monetary policy, the Bank of Canada recently expressed more confidence in the economic recovery. It is expected that the bank will gradually withdraw from the quantitative easing policy in April 2021. Generally speaking, the combination of a proactive fiscal policy and a tight monetary policy may support higher exchange rates. Forecast value at 1.25 for USD/CAD for 0-3 months and 1.22 for 6-12 months. Finally, let's look at if the trend of RMB appreciation may continues.

As the withdrawal of PBOC’s policy may be much earlier than other developed economies, the huge interest rate differential between China and other economies may continue, which will continue to attract a large amount of capital inflows to support the RMB trend.

Although PBOC has announced several measures for capital outflows to ease the pressure on capital inflows, these measures may not be fully effective because major developed markets are still at zero or even negative interest rates. Based on this, expected that the inflow of funds into the China market will be higher than the outflow hence the trend of RMB appreciation may continue.