AUD/USD LIKELY TO BE CAPPED BY THE SOFTNESS OF THE YUAN AND CHINA’S UNDERWHELMING REOPENING – SOCGEN

China’s influence on Asian FX is strong. Economists at Société Générale analyze the outlook for Asian currencies.

AUD/USD is affected by what the Yuan does

Exchange rates always involve two parties directly, but they can be affected by other currencies, indirectly. How much is USD/CNY a function of a strong Dollar, and how is it a function of a weaker Yuan? To the extent that the soft Chinese data matters for the CNY, it matters for all the Asia-Pacific region, including Japan, New Zealand, and Australia.

I’m not sure anything can stop USD/JPY following yield differentials at the moment, but AUD/USD is likely to be capped by the softness of the Yuan and China’s underwhelming reopening.