In a development that must have the normally unflappable Reserve Bank of Australia (RBA) governor, Glenn Stevens, scratching his head, at least, the Aussie dollar reversed the losses it incurred after the core interest rate cut that was announced on Tuesday morning GMT, during the Asian Forex trading session yesterday.
In normal times a rate cut such as this, and especially one that is accompanied by a virtual promise to cut again, soon, would have the effect of commencing a trend to the downside for the currency concerned. But these are not normal times. With Quantitative Easing underway in the Eurozone, and accelerated in Japan, and with no let-up in the flow of Chinese cash looking for a safe home, Australia is fast becoming a victim of its own success in being able to keep its economy humming, even through the worst of the recent Global Financial Crisis.
The country is a member of a club that has a diminishing membership, those that enjoy triple-A rated status from all rating agencies. And there is no indication at all that this is about to change anytime soon.
ECB no longer accepting Greek sovereign bonds for Eurosystem operations
The European Central Bank has fired a fairly substantial warning shot across the bows of the new regime in Greece, members of which have been travelling throughout the rest of the EU attempting to garner support for their country’s debt reduction efforts. It has announced that it will no longer accept Greek sovereign bonds as collateral for loans to member state banks. The move means that banks in Greece must now rely solely on their own central bank for emergency funding, of which there is a need.
There are already reports about the flight of capital from Greek financial institutions. This move can only exacerbate this tendency. While we can await the next development with interest, the citizens of Greece must surely do so with at least some trepidation.