Comments from Westpac on the Australian dollar after yesterday's RBA hold decision:
The RBA's commentary on the A$ took a meaningful twist in today's statement, when it dropped its reference to the currency 'remaining above most estimates of its fundamental value.' ... is likely to continue to lift the AUD in the short term...
The fact that the RBA today dropped the reference to being 'above most estimates of fundamental value'will not be lost on FX markets.
- Our short term fair value model has been fairly stable in recent weeks around 0.7650, a 6 year low.
- The 0.7500/ 0.7530 should now act as the lower end of the range for some time to come
- However, with iron ore and other commodity prices as weak as they are and little net rise in the market's projected terminal rate on the RBA cash rate, it seems unlikely that the A$ can extend too much higher in the short term
- We suspect that the current 0.7500 to 0.7800 range trade could be in place for some time to come
Comments from Sean Callow and Rob Rennie at WPAC
