From Société Générale on the Reserve Bank of Australia deicison and statement yesterday

I've pulled out SG's commentary around the AUD (bolding is mine)

RBA concern over the exchange rate understandably undiminished:

  • The RBA Governor's Statement on the policy decision was extremely close in wording to the August statement. Specifically, the markedly upgraded role of the currency in the economic and policy assessment introduced in August was retained in full. (Removing it would have almost certainly been seen as a signal.)
  • The slight change in wording from the AUD has "appreciated recently" to "appreciated over recent months" is inconsequential and merely reflects the passage of time and the fact that over the month since the August meeting the trade-weighted index (TWI) has eased, albeit by a mere 0.9%.
  • Still, the concern that the exchange rate represents a risk to the predicted pick-up in inflation and economic activity is clear. "The higher exchange rate is expected to contribute to the subdued price pressures in the economy. It is also weighing on the outlook for output and employment. An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast."
  • Clearly, were this risk to materialise, any normalisation of monetary policy would be delayed, and in extremis could give rise to additional monetary easing.
  • This notwithstanding, we note that the TWI has risen 4.4% ytd, and 5.5% from the low point in early June. These are not negligible moves, but they are not large, either. It could be that the RBA wants to warn markets off driving the Aussie higher still, and perhaps also trying to compensate for the minimal attention paid to the exchange rate for much of the first seven months of this year.


More ...
The SG note is long and detailed and contains much more.

In conclusion the bank's outlook (bolding mine):

  • Governor Lowe stated not long ago that is was reasonable to assume the next rate move would be a hike, but indicated this was some way off.
  • Today's statement suggests that at the margin the start of RBA policy normalisation is coming closer. Our call remains for the first hike to take place in August 2018, but we now see the risks as biased towards a slightly earlier start.