RBA’s AUD model consistent with in-house 67c on 6-month view – Goldman Sachs

By FXStreet FXStreet (Bali) – Following the release of the RBA’ preferred model of the A$, Goldman Sachs provides its take, noting that it is of interest that the model’s current estimate of over valuation is consistent with our 67c A$ forecast on a 6 month view.

Key Quotes

“Although this update on the RBA’s preferred A$ model is unchanged, it is of interest that the model’s current estimate of over valuation is consistent with our 67c A$ forecast on a 6 month view. It is also of interest to contrast our long standing approach to modelling the A$ to that of the RBA.”

“Our model showed remarkable stability throughout the estimation period which is key conclusion of the RBA paper. Where our model differs is that that we do not rely on relative interest rates to be a long run variable. Instead we followed the advice of Meese and searched for a ‘deeper’ parameter in the form of the ‘monetary model’ which neatly incorporates the theories of uncovered interest rate parity, purchasing parity and money market equilibrium in the one variable.”

“The virtue of this is that it provides a framework for dealing with quantitative easing strategies in major developed nations and …read more

Source:: FX Street