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6 Jun 2014
AUD jawboning is hardly justified - TDS
FXStreet (Bali) - Annette Beacher and Prash Newnaha, FX Strategists at TDS, think that any talk down of the Australian Dollar at the moment lacks justification.
Key Quotes
"The RBA took the opportunity to pass comment on the AUD again this week but we believe it could have been more direct. Instead we had the RBA state that he moves in the AUD have run counter to the “further decline in commodity prices”. If anything its attempts to talk down the AUD were mild, jawboning with a feather."
"Although the AUD has diverged from the RBA’s own commodity index recently, we find that this has been the case more often than not. Not only did the currency trade above the commodity index when the boom in commodities was in full swing, but it continued to do so even as conditions cooled in the sector. Although the RBA is right on this divergence, it’s not significant and remains within the realms of historical trends."
"The AUD performance once again does not seem out of character. Looking ahead, we expect the AUD to be fairly well supported around current levels. While the market focus has predominantly been on the weakness in iron ore prices, we expect Chinese volumes for iron ore to remain at historic high levels."
"With iron ore prices falling and Chinese mines unable to compete, importing becomes the more attractive option to meet China’s urbanization objectives. This should continue lending support to the AUD for the time being."
Key Quotes
"The RBA took the opportunity to pass comment on the AUD again this week but we believe it could have been more direct. Instead we had the RBA state that he moves in the AUD have run counter to the “further decline in commodity prices”. If anything its attempts to talk down the AUD were mild, jawboning with a feather."
"Although the AUD has diverged from the RBA’s own commodity index recently, we find that this has been the case more often than not. Not only did the currency trade above the commodity index when the boom in commodities was in full swing, but it continued to do so even as conditions cooled in the sector. Although the RBA is right on this divergence, it’s not significant and remains within the realms of historical trends."
"The AUD performance once again does not seem out of character. Looking ahead, we expect the AUD to be fairly well supported around current levels. While the market focus has predominantly been on the weakness in iron ore prices, we expect Chinese volumes for iron ore to remain at historic high levels."
"With iron ore prices falling and Chinese mines unable to compete, importing becomes the more attractive option to meet China’s urbanization objectives. This should continue lending support to the AUD for the time being."