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4 Feb 2015
RBA joined the FX war - Rabobank
FXStreet (Rabobank) - Analysts at Rabobank explained that the RBA cut rates 25bp rate yesterday although said nothing has changed in the economic backdrop since their December meeting, which said ‘rates on hold for an extended period’.
Key Quotes:
"In fact, oil is now in a bull market! Yet the new view that AUD is “fundamentally overvalued” and a weaker AUD is required to achieve “balanced growth” is an admission that the RBA have also joined the FX war."
"Let’s be clear: this was the right thing to do in these circumstances. It is rational to try to push one’s currency down if there is no other growth channel (except housing, which is a double-edged sword)."
"However, with all central banks (except the Fed, where Bullard yesterday said that “patient” should be dropped from their language at the next month: did he even see the drop in US factory orders data?) trying to do the same, it will arguably take much more than just 25bp to do the trick: indeed, AUD was unchanged on the session at the close after an earlier sharp fall. The ECB might note the same, with EUR now ironically back at nearly 1.15 again when currency weakness is all it can realistically hope to achieve."
Key Quotes:
"In fact, oil is now in a bull market! Yet the new view that AUD is “fundamentally overvalued” and a weaker AUD is required to achieve “balanced growth” is an admission that the RBA have also joined the FX war."
"Let’s be clear: this was the right thing to do in these circumstances. It is rational to try to push one’s currency down if there is no other growth channel (except housing, which is a double-edged sword)."
"However, with all central banks (except the Fed, where Bullard yesterday said that “patient” should be dropped from their language at the next month: did he even see the drop in US factory orders data?) trying to do the same, it will arguably take much more than just 25bp to do the trick: indeed, AUD was unchanged on the session at the close after an earlier sharp fall. The ECB might note the same, with EUR now ironically back at nearly 1.15 again when currency weakness is all it can realistically hope to achieve."