On 8 April (Where is the RBA’s pressure point on the AUD?) we argued thata TWI around 72 or an AUD/USD rate of 0.9500 in the run-up to the MayStatement on Monetary Policy could see the RBA resume ‘jaw-boning’ thecurrency.
In our view this is because at that point the strength of the AUD could seethe RBA lower its growth and inflation forecasts for 2015.
Such an adjustment to the RBA’s forecasts could then cast doubt onconsensus expectations that interest rates in Australia will start to rise inearly 2015. As a result, ‘jaw-boning’ of the currency would be likely to bemore successful in our view.
Of course ‘jaw-boning’ is one thing, but would the RBA go further andintervene in an attempt to weaken the AUD? In our view intervention is very unlikely.
In this note we outline: the history of RBA intervention in the FX market;what we see as the RBA’s current views on intervention; and present a‘check-list’ of sorts for intervention.
Read the full report: FX Daily
DB