The Aussie dollar traded back up to 94 cents overnight and had slipped marginally to 0.9390 before the RBA released the minutes from its meeting at 11.30 this morning.
Surprisingly, given almost no one expected anything fresh in this month’s minutes, the RBA seemed to show an apparent sudden change in outlook which was not in the Governor’s statement two weeks ago.
The initial fall was just 20 points to 0.9371 but since then it has fallen another 20 points to sit at 0.9350 in early European trade.
Given recent strength and the rise of the Aussie dollar as a “safe haven” meme it is understandable that traders don’t want to sell Aussie dollars and go short in the current environment and with the Federal Open Market Committee decision only a day-and-a-half away.
But as we highlighted in a separate piece today, the interest rate differential is a big part of the Aussie dollar’s strength.
So to the extent that the 90 day bank bill futures have rallied between 4-8 basis in 2015 and 2016 with 3s also up 6 points at 97.18 and the yield falling to 2.82% there is some subtle undermining of the yield play.
In the very short term, the market is oversold and the move in interest rate markets is more a reappraisal of the timing of rate rises not fresh pricing of cuts so it more likely than not that buyers won’t be too far away.