AUD: Flying too high? – Westpac

By FXStreet Robert Rennie, Research Analyst at Westpac, suggests that after rising about 5% against the US dollar over the past month, the Aussie will surely be a hotter topic at the RBA Board’s meeting on Tuesday than it has been for quite some time.

Key Quotes

“Has AUD/USD finally broken out of the familiar 0.70/0.74 range to a new higher plane? Is AUD no longer “adjusting to the evolving economic outlook”?

I posed this question to RBA governor Stevens last week at the ASIC forum. The answer he gave was – “Unless you think that the commodity price trend now is different and we are heading back to a world of considerably higher prices for an extended period, and you think the Fed is never going to lift rates, it is not clear that that situation will warrant a much higher exchange rate than this and there is some risk actually that the currency might be getting a bit ahead of itself”.

So is the Australian commodity price trend different? The Westpac Australian Export Commodity Futures Index currently sits close to 1 year highs with iron ore being a key part of this story. However, I am not sure that this is a change …read more

Source:: FX Street