RBA more cautious about talking down the AUD – MUFG

By FXStreet Lee Hardman, Currency Analyst at MUFG, suggests that the weakening global growth outlook and likelihood that China’s economy will continue to slow in the coming years does not appear to provide strong foundations for a sustainable and broad-based rebound in commodity prices at the current juncture.

Key Quotes

“It was a view echoed by RBA Governor Stevens who attempted to market expectations for further Australian dollar strength. He stated that “unless you think that the commodity price trend is now different and we’re heading to a world of considerable higher prices for an extended period, and the Fed’s never going to lift rates, it’s not clear that the situation will warrant a much higher exchange rate than this.

In these circumstances he warned that “there’s some risk that the currency might be getting a bit ahead of itself”. The recent improvement in global investor risk sentiment and easing of market volatility are boosting demand for relatively high yielding currencies like the Australian dollar as well increasing the likelihood of it overshooting economic fundamentals in the near-term.

Governor Steven’s comments have had only a limited impact on the Aussie which has continued to strengthen which in …read more

Source:: FX Street