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The aussie has underperformed most of the G10 in recent weeks and also the Chinese yuan, slipping from 5.05 to the 4.90 area, reaching lows since early February. In order to see the AUD/CNY pair at 5.04/08, the aussie should take advantage of the expected USD weakness, according to economists at Westpac.

Further yuan appreciation in H2 21

“To recover to our AUD/CNY 5.04-5.08 projections in H2 we will need to see a resumption of substantial broad USD decline, with AUD playing its usual role of outperforming amid USD depreciation.”

“Commodity prices should also help Australia maintain its own historically strong trade surpluses in coming months.”

“With the China 10 year bond yield 3.13% while the Fed maintains QE, portfolio flows also reinforce our forecast for USD/CNY to 6.30 Q3 and 6.20 year-end.”