The Aussie dollar traded below 76 cents overnight for the first time since mid-April. It’s currently sitting just above the lows at 0.7604, just 80 points higher than the low for the year at 0.7532 we saw in early April.
That is good news for the economy, as we saw yesterday with the increase in exports driving manufacturing’s first expansion for six months. The weaker Aussie dollar is also helping to bring in more tourists to Australia and slow the rate of Australians heading overseas for holidays. That’s good for economic growth too.
A number of senior figures at the RBA, from governor Glenn Stevens down, are on the record as saying that a lower Aussie dollar would benefit the economy. Indeed, in last month’s statement accompanying the decision to cut rates, Stevens said:
Further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices.
Up to this point, the RBA has been loathe to intervene to drive the Aussie lower. But Stevens has not missed any opportunity in the past few years to talk the Aussie down. Jawboning, that’s called.
For mine, there is no better place to jawbone than in his statement this afternoon after the widely expected decision to leaves rates at 2%. Stevens has the best opportunity he has had in ages to combine the strengthening environment for the US dollar with a wink to lower rates, an explicit easing bias, to push the Aussie dollar lower.
If he gets it right he can have the Aussie trading down and through the year’s lows later today with a bias to lower levels as the year progresses.
That would be great news for the economy.