AUSSIE-YEN: Westpac note that the "risk barometer....>

AUSSIE-YEN: Westpac note that the "risk barometer AUD/JPY found fuel in December

and January from anticipation of the US-China "phase one" trade deal, reaching

highs since May 2019. The pair then wobbled on Iran-US tensions, followed by a

sustained fall through Y74 on expectations that Australia has more to lose from

the COVID-19 outbreak than Japan, even if the latter is already suffering

significant economic damage. AUD is actually strongest in the G10 so far in

February, including a 1.7% gain versus JPY. The RBA's renewed optimism is key to

this outperformance. It retained its 2.75% Australia 2020 growth forecasts, well

above Westpac's 1.9% view. We lowered our growth forecasts in response to the

bushfires and COVID-19 but the RBA has not. The implied cash rate for Dec 2020

has bounced from 0.32% to 0.47% over the past 2 weeks, boosting A$. The Bank of

Japan meanwhile is on hold and not buying many JGBs but after dismal Q4 GDP

(pre-virus), will need to consider looser policy in coming months. We see both

AUD/USD and USD/JPY trending lower multi-week, limiting the pace of the AUD/JPY

decline that remains our base case (largely premised on 2 RBA rate cuts this

year), towards Y72 end-March and to cycle lows around Y70 by June."