29 Oct 2013
Flash: AUD undermined by comments from RBA Governor - BTMU
FXstreet.com (Athens) – Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ notes that the Australian dollar has underperformed in the Asian trading session with the AUD/USD rate extending its recent retracement lower after failing to break above resistance from its 200-day moving at around 0.9750 on the 23rd October.
Key Quotes
“The Australian dollar has underperformed in the Asian trading session with the AUD/USD rate extending its recent retracement lower after failing to break above resistance from its 200-day moving at around 0.9750 on the 23rd
October. Australian dollar weakness has accelerated overnight following comments from RBA Governor Stevens who stated that the Australian dollar is likely to be “materially lower” at some point with its current elevated
level not supported by relative costs and productivity.”
“Governor Stevens also stated that Australia’s terms of trade are likely to fall further not rise which will also weigh upon the Australian dollar. The comments highlight that the Australian dollar is currently viewed as being highly overvalued. However with Fed QE tapering delayed into 2014, the Australian dollar should continue to derive support from carry demand in the near-term.”
“On a more positive note Governor Stevens stated that China growth remains robust. The PBoC resumed open market operation over night for the first time since the 15th October. The PBoC injected liquidity through CNY13.0
billion of seven-day reverse-repurchase agreements. Still money market rates in China continued to rise as the size of the liquidity injection was relatively small with the interbank seven-day repurchase rate rising by a further 0.7 point to 6.3%. The liquidity squeeze is expected to prove only temporary having limited negative impact upon the Chinese economy.”
Key Quotes
“The Australian dollar has underperformed in the Asian trading session with the AUD/USD rate extending its recent retracement lower after failing to break above resistance from its 200-day moving at around 0.9750 on the 23rd
October. Australian dollar weakness has accelerated overnight following comments from RBA Governor Stevens who stated that the Australian dollar is likely to be “materially lower” at some point with its current elevated
level not supported by relative costs and productivity.”
“Governor Stevens also stated that Australia’s terms of trade are likely to fall further not rise which will also weigh upon the Australian dollar. The comments highlight that the Australian dollar is currently viewed as being highly overvalued. However with Fed QE tapering delayed into 2014, the Australian dollar should continue to derive support from carry demand in the near-term.”
“On a more positive note Governor Stevens stated that China growth remains robust. The PBoC resumed open market operation over night for the first time since the 15th October. The PBoC injected liquidity through CNY13.0
billion of seven-day reverse-repurchase agreements. Still money market rates in China continued to rise as the size of the liquidity injection was relatively small with the interbank seven-day repurchase rate rising by a further 0.7 point to 6.3%. The liquidity squeeze is expected to prove only temporary having limited negative impact upon the Chinese economy.”