AUDCNY: Aussie should rise against the Chinese yuan - Westpac

Martina Song, Research Analyst at Westpac, suggests that the Aussie should rise against the Chinese yuan over the coming weeks.

Key Quotes

“AUD/USD has traded within a 3 cent range since mid-January. It should remain mostly steady between around 0.74 and 0.77. It has been slipping as iron ore prices softened, and as waves of risk aversion hit, such as from tensions in the Korean peninsula. It should however be supported by trade surpluses and a steady RBA outlook, as well as domestic data.”

“USD/CNY meanwhile has stabilised after depreciating last year. Capital outflow pressures have eased as have US-China trade tensions. A pullback in the US dollar so far this year has also helped combat concerns about the continued depreciation in the yuan.”

“Over the next few weeks, we see the US dollar gaining more against the yuan than the AUD. Positive growth and trade, as well as rises in equity market have seen Asian currencies gaining, even against a backdrop of higher US yields. Notably though, the yuan has underperformed. The AUD meanwhile has remained relatively resilient. Thus, we see AUD/CNY rising towards the 5.25/30 area in the coming weeks.”