26 Mar 2014
RBA watcher McCrann: AUD jawboning pointless
FXStreet (Bali) - RBA watcher Terry McCrann, from the Australian Herald-Sun, has probably put a smile in the face of Aussie long traders, after suggesting in his latest article that RBA Governor Stevens is pretty much done trying to talk down the AUD, saying 'it would be pointless' for Stevens to try to ‘jawbone’ the dollar lower.
Key Quotes
"Such jawboning only works if it has credible backing — an implicit or indeed explicit message that interest rates would be cut if the dollar stayed ‘too high’."
"There is no way that Stevens can hint that. Not with the picture the RBA is painting of our economy picking up pace; and, most importantly — as he did again on Wednesday — of signs that it was ‘rebalancing’ away from the (fading) resources boom."
"Also, not with inflation bumping along the 3 per cent RBA ceiling; and with the buoyant property market beginning to lure the banks into over-exuberant lending. Again, something specifically highlighted by the RBA separately on Wednesday."
"Be under no illusion. The RBA wants the dollar lower. At least somewhere around the mid-80s; even a little lower."
"But it has no magic wand to achieve that. Essentially it has to hope that, to coin a phrase, water will essentially flow down the hill. That as the USA tapers, the US dollar will go up and the Aussie will go down."
"China though is becoming a rogue factor. If China slows it would help this process. But if China gets a second wind, our dollar could track higher even over a US taper."
Key Quotes
"Such jawboning only works if it has credible backing — an implicit or indeed explicit message that interest rates would be cut if the dollar stayed ‘too high’."
"There is no way that Stevens can hint that. Not with the picture the RBA is painting of our economy picking up pace; and, most importantly — as he did again on Wednesday — of signs that it was ‘rebalancing’ away from the (fading) resources boom."
"Also, not with inflation bumping along the 3 per cent RBA ceiling; and with the buoyant property market beginning to lure the banks into over-exuberant lending. Again, something specifically highlighted by the RBA separately on Wednesday."
"Be under no illusion. The RBA wants the dollar lower. At least somewhere around the mid-80s; even a little lower."
"But it has no magic wand to achieve that. Essentially it has to hope that, to coin a phrase, water will essentially flow down the hill. That as the USA tapers, the US dollar will go up and the Aussie will go down."
"China though is becoming a rogue factor. If China slows it would help this process. But if China gets a second wind, our dollar could track higher even over a US taper."