RBA’s Stevens sees AUD/USD at 0.85 as Reasonable

Reserve Bank of Australia Governor Glenn Stevens signaled a weaker local currency is preferable to lower interest rates to help spur the nation’s economy, saying the so-called Aussie’s natural level is probably below its current value.

“I thought 85 U.S. cents would be closer to the mark than 95 cents,” he said in an interview published today in the Australian Financial Review. “But really, I don’t think we can be that precise.”  The Australian dollar slumped, buying 89.81 U.S. cents at 8:37 a.m. in New York after trading at 90.58 cents before his remarks were published.

“To the extent that we get some more easing in financial conditions, at this point it’s probably more preferable for that to be via a lower currency at the margin than lower interest rates,” the paper quoted Stevens as saying in an article on its website. “If things over the medium term evolve as we’re presently assuming — and I think it’s reasonable to make these assumptions — it’s going to be surprising if a nine at the front is the right number.”

Bloomberg

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