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The Australian dollar has appreciated steadily despite the grim economic data, however, escalating the tensions between the US and China might endanger Australian exports to China. In this backdrop, the FX analysis team at Rabobank warn about an AUD/USD decline towards 0.6000 later this year.


Key quotes   

“Today USD/CNY moved sharply higher. This could be a shot across the bow from China to remind the US not to push too hard against its Hong Kong policies. If the CNY sinks significantly lower, there will be a cost to all of China’s trading partners including Australia – a factor which would weigh on the outlook for the AUD.”

“Further tariffs and a re-instigation of trade wars would clearly have negative consequences for China’s economic recovery. This raises the risk that the Chinese authorities could allow the value of the CNY vs. the USD to slip. AUD/USD has moved lower through European hours today as the market weighs up this potential threat to China’s trading partners.”

“It also seems possible that the AUD will be caught in the middle of what is being described as a new cold war between the US and China. We maintain that there is still a risk that AUD/USD will see 0.60 again later this year.”