Analysts at Westpac Banking Corporation explained that the Australian dollar has fallen against most G10 and Asian currencies over the past 3 months, but is little changed versus the Chinese yuan.
Key Quotes:
“Yuan depreciation against a broadly strong US dollar was particularly pronounced in June-July but since August, Chinese policymakers have prioritized currency stability, with the key USD/CNY 7.00 level not seriously threatened. This is surely not a permanent line in the sand, but seems likely to hold in coming weeks.”
“AUD/USD was range-bound for many weeks into mid-August but has since struggled, printing lows since early 2016. Commodity prices have actually been supportive of AUD, with Westpac’s basket of Australia’s key commodity prices reaching highs since March.”
“So AUD underperformance on crosses may reflect its apparent role as a proxy for US-China trade tensions, which remain elevated.”
“Our baseline view into year end is for AUD/USD to push back to 0.72 given commodity price backing, while USD/CNY peaks around 6.95, helping AUD/CNY back to 5.00.”
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