RBA Left With Little Choice but Words

Stepping up verbal intervention may be the Reserve Bank of Australia’s only option to curb the Aussie as strengthening economic data and a neutral policy stance drive a rebound in the currency this year.

The local dollar briefly fell on March 4, when Governor Glenn Stevens said the exchange rate remained “high by historical standards” in a statement accompanying this month’s policy decision, reintroducing remarks on its strength left out in February. Stevens speaks before the House Economics Committee today. The Aussie surged to an almost three-month high yesterday after data this week showed economic growth and retail sales rose more than analysts predicted and the trade surplus widened to the most in 2 1/2 years.

Stevens commented on the currency in every 2013 statement since August, when he and his board made their last cut that took the cash rate to a record-low 2.5 percent. His remarks on the Aussie being “uncomfortably high” in November and December helped drive its worst annual performance in five years. The currency rose last month after the RBA signaled a period of interest-rate stability, and has sustained gains this month even after the central bank resumed noting its strength.


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