The Australian dollar made modest gains on Friday as the market weighed whether the PBOC’s rate cut one-off move or the start of a cycle. On the weekend, there were indications more moves could be coming.
Westpac looks at the 2010 in China and the effects on the Australian dollar. The first cut came on June 7 and near the same time the Australian dollar bottomed at 0.9700 and continued climbing into early August, hitting 1.06.
There were clearly other factors at play during this period but in edition to AUD/USD rising, we also saw Australian dollar outperformance against EUR and JPY. Interestingly NZD outperformed AUD for much of the June period after the first cut but this trend changed dramatically through July of 2012 after the second cut announcement.
This time, they are wary of Australian dollar longs against the high-flying US dollar but prefer buying the Aussie against the yen and euro.
AUD and PBOC 2012 cycle
