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According to analysts at Westpac, AUD has fallen against almost all Asian currencies over the past 3 months as it has factored in the RBA’s change of tune on interest rates since early February, but the Chinese yuan has risen more than most other Asian currencies in this time.

Key Quotes

“We expect RBA easing to continue to undermine AUD/CNY multi-month, with an end-September target of 4.66. But nearer term, the pair could bounce if the RBA holds rates steady until August, in line with Westpac forecasts.”

“Markets are pricing >40% chance of the RBA cutting the cash rate to 1.25% next week and >100% chance by July. So if the RBA takes a more cautious approach to easing policy, AUD should bounce on crosses including CNY.”

“FX stability remains a priority for Chinese policymakers. Having avoided USD/CNY 7.00 in Oct-Nov 2018, the yuan appreciated about 3-4% over Dec 2018 to Jan 2019 as US yields fell to reflect the Fed’s more dovish message. But since then, USD/CNY has been largely rangebound either side of 6.70. AUD should be the main driver of AUD/CNY in coming months.”