An article on Bloomberg (and available free on the net, here) says the RBA is frustrated by the continuing strength of the Australian dollar. The article provides a useful summary of where we are at with the AUD and what the RBA is thinking. In brief (but more detail at the link):
- AUD is up 3.9% against the yen in 2014
- Up 2.4% against the euro
- An iron-ore glut has halved prices of this key export
- Reserve Bank of Australia Governor Glenn Stevens said again this month the local dollar “remains above most estimates of its fundamental value”
(Note that although the AUD/USD has fallen, to under 85 cents as Stevens desired in December 2013, the drop in iron ore prices now has Stevens looking for a fall further to 75 US cents)
The article goes on:
- Macquarie Group Ltd., Australia’s largest investment bank, predicts currency-depreciating stimulus in Japan and Europe will continue to hamper declines next year. “When it comes to euro and yen, we actually expect Aussie to be pretty flat,” David Forrester, senior vice president for Group of 10 foreign-exchange strategy at Macquarie in Singapore, said by phone on Dec. 19. “That’s going to be a key source of frustration for the RBA.” Australia’s dollar will have to decline more against the greenback to influence the trade-weighted index given its lack of headway versus the other currencies, and in this it’s likely to disappoint Stevens, Forrester said
More at the link, above
