AUSSIE-YEN: Westpac writes "persistent optimism......>

AUSSIE-YEN: Westpac writes "persistent optimism over a partial trade deal by

both US and Chinese officials plus the breakthrough in Brexit negotiations have

improved risk sentiment notably in recent weeks. This has sparked a rally in

risk barometer AUD/JPY to highs since late July. The global risk mood (including

a record high on the MSCI World Index) has reinforced the FOMC's message of an

indefinite pause on rate cuts. This will be welcomed by the RBA as it predicts

Australia's economy to accelerate from the slowest growth pace since 2009. The

risk rally and accompanying rise in US yields has made JPY the weakest G10

currency over the past month. This environment has provided some cover for the

Bank of Japan's cautious policy tweak end-Oct. The question of course is how

long this can last. While a limited US-China trade agreement seems likely, we

still lean to the gloomy side of market expectations in terms of the scale of

removal of tariffs. We also see downside risks to Australia's key commodity

prices in coming weeks and see scope for greater RBA rate cut risk to be priced

for Feb 2020, from today's <50% chance. This should mean AUD/JPY has little

further upside near term, with risks by Dec back to 73 or lower."