The Australian central bank, the Reserve Bank of Australia (RBA),
decided, as widely expected, to keep interest rates on hold last night.
Furthermore, it also said precisely nothing in the policy statement accompanying
the announcement that would have the effect of moving the currency. The
following is part of the statement by the governor, Glenn Stevens:
“The increase in
dwelling prices has been slower this year than last year, though prices
continue to rise. The exchange rate remains high by historical standards,
particularly given the declines in key commodity prices, and hence is offering
less assistance than it might in achieving balanced growth in the economy.
Looking ahead, continued accommodative
monetary policy should provide support to demand and help growth to strengthen
over time. Inflation is expected to be consistent with the
2–3 per cent target over the next two years.
In the Board’s judgement, monetary policy
is appropriately configured to foster sustainable growth in demand and
inflation outcomes consistent with the target. On present indications, the most
prudent course is likely to be a period of stability in interest rates”.
On the surface, the RBA would prefer a weaker Australian dollar.
However, this can only come about in a limited number of ways, and the most
effective would be a lowering of interest rates. The bank has not wanted to do
that because of fears of a consequent property bubble. This statement seems to
be telling us, if it is telling us anything, that they are happy with the
status quo, even if that includes an Aussie dollar that “…remains high by historical standards”.
Oz balance of trade
improves
The other announcement Down Under last night was on the
Australian Balance of Trade. This has improved from a negative AUD 2 Billion to
a negative AUD1.68 Billion as against minus AUD1.9 Billion expected.
This is an excellent outturn and, in the absence of any measures
to weaken the currency by the RBA, should be a positive for the currency.
Australian monetary authorities seem, once again, to be relying
on external factors, like the decisions of the US Federal Reserve, to influence
its currency exchange rate.
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