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3 Jul 2014
RBA verbal interventions expected, but unlikely to be successful - Nomura
FXStreet (Bali) - According to Charles St-Arnaud, FX Strategist at Nomura, notes that while verbal interventions by the RBA are expected, they are unlikely to be successful.
Key Quotes
"With AUD touching 0.95 and diverging from fundamentals, some investors have started to worry about verbal intervention by the RBA, especially since it strengthened its comments on the currency at recent policy meetings."
"While verbal interventions are possible, we believe AUD would need to appreciate even more for the RBA to further talk down the currency, based on previous experience."
"As such we believe that the currency would need to break 0.97 for that to happen. Moreover, with the economy in a better shape than last autumn and Australia holding the Presidency of the G20, we think the threshold for verbal interventions could be higher."
"Nevertheless, with the current appreciation due to financial flows in search for higher yields, we doubt that verbal intervention would meaningfully affect AUD and would require higher US yields."
Key Quotes
"With AUD touching 0.95 and diverging from fundamentals, some investors have started to worry about verbal intervention by the RBA, especially since it strengthened its comments on the currency at recent policy meetings."
"While verbal interventions are possible, we believe AUD would need to appreciate even more for the RBA to further talk down the currency, based on previous experience."
"As such we believe that the currency would need to break 0.97 for that to happen. Moreover, with the economy in a better shape than last autumn and Australia holding the Presidency of the G20, we think the threshold for verbal interventions could be higher."
"Nevertheless, with the current appreciation due to financial flows in search for higher yields, we doubt that verbal intervention would meaningfully affect AUD and would require higher US yields."