13 Dec 2013
Flash: Hard to see AUD bouncing much - Westpac
FXstreet.com (Bali) - The absence of data in Asia, according to Sean Callow, FX Strategist at Westpac, leaves markets with much time to analyze the details of RBA Governor Steven's interview in the AFR.
Key Quotes
There are two passages that have attracted much attention: "I thought 85 would be closer to the mark than 95 at the time we started to make some comments some months ago, but, really, I don’t think we can be that precise"... "I’m going to find it a bit surprising if the long run equilibrium [for the Australian dollar] number starts with a nine".
"Both have been interpreted as being similar in nature to recently more aggressive comments from Stevens including his warning that it is "quite likely that at some point in the future the Australian dollar will be materially lower than it is today" (29/10/13 "Remarks to Citi's 5th Annual Australian & New Zealand Investment Conference") and "Our position has long been, and remains, that foreign exchange intervention can, judiciously used in the right circumstances, be effective and useful" (21/11/13 "The Australian Dollar: Thirty Years of Floating")."
"Using a simple process of 'bucketing' RBA comments into simple groups, we find that moderate to strong verbal intervention can impact the market in a fairly material way. However, timing is everything and talking about intervention is very different from actually intervening. That is something that markets are all too aware of."
"However, as we look into next week we see little that will turn the A$ around in a material way. We have been well warned that MYEFO on Tuesday will be a depressing affair. The results of the FOMC (6am Thu AEST) will also been keenly in focus. Following the 2nd consecutive 200k+ payrolls and the budget deal (yet to be cemented with a vote) two of the three factors that side-lined the Fed in Sep seem less threatening, raising odds of a Dec taper. We rate the odds for Dec, coupled with strengthened forward guidance and/or an IOER rate at 40-45%. It is hard to see the AUD bouncing much into mid next week."
Key Quotes
There are two passages that have attracted much attention: "I thought 85 would be closer to the mark than 95 at the time we started to make some comments some months ago, but, really, I don’t think we can be that precise"... "I’m going to find it a bit surprising if the long run equilibrium [for the Australian dollar] number starts with a nine".
"Both have been interpreted as being similar in nature to recently more aggressive comments from Stevens including his warning that it is "quite likely that at some point in the future the Australian dollar will be materially lower than it is today" (29/10/13 "Remarks to Citi's 5th Annual Australian & New Zealand Investment Conference") and "Our position has long been, and remains, that foreign exchange intervention can, judiciously used in the right circumstances, be effective and useful" (21/11/13 "The Australian Dollar: Thirty Years of Floating")."
"Using a simple process of 'bucketing' RBA comments into simple groups, we find that moderate to strong verbal intervention can impact the market in a fairly material way. However, timing is everything and talking about intervention is very different from actually intervening. That is something that markets are all too aware of."
"However, as we look into next week we see little that will turn the A$ around in a material way. We have been well warned that MYEFO on Tuesday will be a depressing affair. The results of the FOMC (6am Thu AEST) will also been keenly in focus. Following the 2nd consecutive 200k+ payrolls and the budget deal (yet to be cemented with a vote) two of the three factors that side-lined the Fed in Sep seem less threatening, raising odds of a Dec taper. We rate the odds for Dec, coupled with strengthened forward guidance and/or an IOER rate at 40-45%. It is hard to see the AUD bouncing much into mid next week."