IMF Sees AUD/USD still 10% Too High

Australia’s central bank should maintain easy policy settings as a mining-investment slowdown and a local currency about 10 percent overvalued drag on economic growth, the International Monetary Fund said.

“With growth currently on the soft side, the real exchange rate still overvalued and weighing on the non-mining sector, and inflation within the target range, monetary policy should remain accommodative,” the IMF said in a preliminary statement after reviewing the nation’s economy.

While the Reserve Bank of Australia “has done a lot” with 225 basis points of rate cuts since late 2011, it can’t engineer a depreciation of the currency, Brian Aitken, IMF mission chief, Asia and the Pacific Department, said in response to questions in Sydney yesterday. With the benchmark interest rate at a record-low 2.5 percent, the RBA still has room to respond if the growth outlook worsens, he said.

Bloomberg

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.