The Aussie is more than two cents lower than the high from earlier this week. It’s back at 92.19 cents this morning after the sell-off – that began with yesterday’s weaker Chinese data – built in earnest overnight as Glenn Stevens threatened the market with intervention.
The low was 91.98 and while Glenn Stevens and the RBA will be pleased with the outcome (the technical outlook that suggests a move back to 88 cents), Westpac’s head of currency strategy Rob Rennie wrote in a note to clients that he was disappointed about how far Stevens went:
We had expected this evening’s speech from RBA Governor Stevens to be a perfect opportunity to again warn of the downside risks for the A$.
Back on October 29, Stevens warned “it seems quite likely that at some point in the future the Australian dollar will be materially lower than it is today”.
Stevens this evening did note “In the end it is not possible to come to a definitive assessment on the extent of currency misalignment at the moment, on the basis of standard metrics (and having regard to the statistical imprecision of such metrics). Having said that, my judgement is that the Australian dollar is currently above levels we would expect to see in the medium term”.
This certainly falls short of our expectations.
Stevens went on to suggest that intervention is still possible as long as it can pass the “effectiveness” test and the market sold off heavily.
Whichever way you cut it, Stevens has knocked the Aussie dollar down 5 cents in the past couple of months, which is a great job and likely equivalent to at least one rate cut he doesn’t have to deliver.