The Australian dollar fell, putting it on track for its longest stretch of weekly losses since 1985, as the central bank governor’s quest to talk the currency lower continued to prove effective.
Governor Glenn Stevens signaled a weaker Aussie is preferable over lower interest rates to help spur the nation’s economy, and said a level of 85 U.S. cents “would be closer to the mark than 95 cents,” in an interview published in the Australian Financial Review today. The governor last month put currency markets on notice, saying, while the benefits of intervention haven’t “so far” outweighed the costs, it “doesn’t mean we will always eschew” currency sales.
“The RBA appears to have made a strategic decision in mid-October that they could get the Aussie down and they should try and get it lower as they downgraded their view of the resource sector,” said Greg Gibbs, a Singapore-based strategist at Royal Bank of Scotland Group Plc. “They have sent a message and the currency has reacted. The real risk by saying 85 cents is that the market feels more comfortable with the currency around current levels.”
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