AUD should trend lower against the Chinese yuan - Westpac

Sean Callow, Research Analyst at Westpac, suggests that the AUD should trend lower against the Chinese yuan in the weeks ahead, to around 4.90 over the next month and 4.80 during Q4 (both CNY and CNH).

Key Quotes

“Another RBA rate cut and lower commodity prices should reinforce pressure on AUD/USD multi-week/month, to the low 0.70s.

Anticipation of a Fed rate hike in December should underpin a broad-based (though not steep) USD up trend in coming months. This should include CNY and CNH, with most Asian currencies weakening modestly. Yuan decline should be limited to the USD/CNY 6.75 area during Q4, a smaller yuan fall than on AUD/USD, leaving AUD/CNY and AUD/CNH softer.

This would still be consistent with yuan depreciation in trade-weighted terms, as Chinese exports remain sluggish and capital outflow persistent.”