Australia’s currency remains overvalued on most measures while any sell-off in global fixed-income markets could be “relatively violent,” central bank Assistant Governor Guy Debelle said in a speech.
“The Australian dollar is still higher than most conventional estimates of fundamentals would indicate, notwithstanding its recent decline,” Debelle said in the text of a speech in Sydney today. “The exchange rate is thus offering less assistance than would normally be expected in achieving balanced growth in the Australian economy. A lower exchange rate would be helpful in achieving that objective.”
Debelle’s address focused on the market’s failure to react in a sustained way to instability in the Middle East and eastern Europe, uncertainty about the turning point in U.S. monetary policy, the future direction of policy in Japan and Europe and concern about the strength of China’s economy. Investors may have been pacified by central banks’ increased forward guidance for interest rates, he said in the text of his speech.