AUD stable ahead of RBA but still wary of CNY

AUD has been firm ahead of the Reserve Bank of Australia's (RBA) meeting today. The RBA is not expected to join the Bank of Japan (BOJ) in easing monetary policy. But that's not the reason why AUD/USD closed above 0.71 on the first day of February. The AUD's 3.6% appreciation from the year's low of 0.6824 in mid-Jan had more to do with the relief rally in global financial and commodity markets. It was really from speculators paring their gross short AUD positions than from an accumulation of gross long positions. The AUD's recovery was in between the 4.5% in the Canadian dollar and the 2.2% in New Zealand dollar. 

AUD/USD has been consolidating within 0.68 and 0.74 after the post-CNY devaluation last August. Pushes below 0.70 were triggered by weak CNY expectations leading to risk aversion and aggressive selling in the AUD/JPY cross rate. Otherwise, AUD/USD was supported by the RBA's stable rate stance, especially after Australia's unemployment rate fell below the psychological 6% level from Sep15. 

Better jobs market is the one key reason why no one expects any rate move by the RBA today. Nonetheless, close attention will be paid to the RBA's assessment of global growth risks. The market remains convinced that the AUD cannot buck the downside risks from more depreciation in the CNY.