29 Oct 2013
Flash: Did RBA Stevens give a reason to buy the AUD? - RBS
FXstreet.com (Barcelona) - RBA governor Stevens managed to successfully talk down the AUD in his short opening address to an investment conference in Australia earlier today, notes Greg Gibbs, FX Strategist at RBS.
Key Quotes
"There was little new of substance. He indicated with some force and confidence that even at levels before the recent recovery in the AUD (perhaps around 90 US cents per $A) he thought it was "unusually high". And he predicted that Australia's "terms of trade are likely to fall" and therefore "at some point in the future the AUD will be materially lower than it is today".
"Stevens appeared to hit a chord with market sentiment and pushed the AUD lower on his rather obvious jawboning efforts. However there was nothing in these comments other than Stevens viewpoint on global market conditions that might encourage a lower AUD. A viewpoint that reflects his bias to wish for conditions that will push the AUD lower."
"Stevens made ambiguous comments on the housing market. He is comfortable with "some" rise in housing prices (Stevens purposefully used italics to emphasise the "some"). He noted overall housing credit growth is still moderate (4 to 5%). But he said the RBA will be "paying close attention" to credit growth in the period ahead. He is somewhat more concerned by a 40% rise in investor housing finance approvals (+40%y/y)."
"This suggests that the RBA much prefers a lower exchange rate to lower interest rates to further stimulate growth if required. This is pure jaw-boning the AUD will little hint of policy shift to back it up. As such, we should see little lasting impact on the AUD. In fact his relative confidence in the US, European and Chinese outlook and the displeasure for further cutting rates might be regarded as reasons to buy the AUD."
Key Quotes
"There was little new of substance. He indicated with some force and confidence that even at levels before the recent recovery in the AUD (perhaps around 90 US cents per $A) he thought it was "unusually high". And he predicted that Australia's "terms of trade are likely to fall" and therefore "at some point in the future the AUD will be materially lower than it is today".
"Stevens appeared to hit a chord with market sentiment and pushed the AUD lower on his rather obvious jawboning efforts. However there was nothing in these comments other than Stevens viewpoint on global market conditions that might encourage a lower AUD. A viewpoint that reflects his bias to wish for conditions that will push the AUD lower."
"Stevens made ambiguous comments on the housing market. He is comfortable with "some" rise in housing prices (Stevens purposefully used italics to emphasise the "some"). He noted overall housing credit growth is still moderate (4 to 5%). But he said the RBA will be "paying close attention" to credit growth in the period ahead. He is somewhat more concerned by a 40% rise in investor housing finance approvals (+40%y/y)."
"This suggests that the RBA much prefers a lower exchange rate to lower interest rates to further stimulate growth if required. This is pure jaw-boning the AUD will little hint of policy shift to back it up. As such, we should see little lasting impact on the AUD. In fact his relative confidence in the US, European and Chinese outlook and the displeasure for further cutting rates might be regarded as reasons to buy the AUD."