AUD/CNY Outlook:
The AUD/CNY exchange rate is likely to increase as it currently trades above its 90-day average and is near recent highs. Strong demand for Australian commodities supported by solid economic growth in China underpins this outlook.
Key drivers:
- Rate gap: The Reserve Bank of Australia's cautious approach contrasts with the People's Bank of China's focus on currency stability, influencing capital flows towards the AUD.
- Risk/commodities: Solid demand for Australian exports, especially iron ore and coal, is driven by China's expanding manufacturing sector, bolstering the AUD.
- One macro factor: China's government stimulus measures, aimed at revitalizing its economy post-pandemic, are providing additional support to the CNY while enhancing overall economic stability.
Range:
Expect the AUD/CNY to drift within its recent range, potentially testing upper limits if current trends continue.
What could change it:
- Upside risk: Increased demand for Australian commodities due to further growth in China’s economy.
- Downside risk: Any significant escalation in geopolitical tensions impacting trade relations could pressure the AUD.
