RBA Governor Glenn Stevens will skipping into work today now the Aussie dollar is trading back down near the 77 cent level this morning.
Key to the move overnight, which has the AUSUSD sitting at 0.7735, was a surge in the US dollar on the back of stronger than expected data and expectations that the Fed is going to hike rates.
That means the Aussie dollar has now fallen more than 5% from this month’s highs around 0.8150 earlier this month.
It’s a big reversal after traders took the Aussie higher in early May when the RBA dropped its explicit easing bias in the governor’s post-easing statement. At the time, some commentators said the RBA had kicked an own goal. But the reality has never been that the RBA can itself control the level of the Aussie dollar – no more so than Fortescue can control the price of iron ore.
Rather, Stevens and his colleagues have continually highlighted that they believed it’s when the US Federal Reserve starts to raise rates in the US that the US dollar will strengthen and the Aussie dollar will fall.
After US home starts last week, last night’s prints for durable goods, consumer confidence and Case Shiller house prices have simply reinforced the first Fed hike is just a matter of time. Add in enduring worries about Greece and the preconditions for a continued surge in the US dollar are in place.