Halister News

(Bloomberg) -- Analysts describe RBA’s attempt to talk down the Australian dollar as rather tame, as the central bank highlighted the effects the elevated currency would have on subduing price pressures and employment.

• RBA warns rising Australian dollar will subdue inflation; wage growth to remain low for a while, yet employment growth has been stronger and will see continued growth
• Aussie briefly dips but rebounded quickly after RBA’s statement
• Swaps traders continue to forecast no better-than-even chance of rates rising until July 2018
• RBC Capital Markets, Elsa Lignos, global head of FX strategy
  • Statement was neutral and though RBA tried jawboning the currency, it means little when the forward curve is flat and there is no threat of cuts
  • “The low level of interest rates is continuing to support the Australian economy” -- this phrase, taken together with some modest jawboning on the currency, would suggest the current low cash rate is warranted
  • Tightening financial conditions is also lending support to a holding stance
• Westpac Sydney, Robert Thompson rates strategist
  • It’s not obvious that the current high IN THE AUSSIE?>> will be the high before we start to see weakness come through, but it will be close
  • Expects to see a weaker AUD over time on the basis the Fed raises rates/tapers before year-end, commodity prices will fall after China’s National Party Congress and risk aversion will rise
  • Statement does not markedly change the equation for rates markets in the short term with front-end carry trades the right response, especially with growth risks still skewed to the downside
• United Overseas Bank, Lee Sue Ann, economist
  • The RBA’s quarterly Statement on Monetary Policy this Friday will provide more details on the board’s views which could have a greater impact on AUD
  • RBA signaled it was not particularly worried about housing prices, saying they were rising briskly in some markets
• Credit Agricole, Manuel Oliveri FX strategist
  • RBA’s rhetoric without the threat of rate cuts will have only a modest impact on currency, especially as bills strip in Australia is already very flat with no rate hike priced in until mid-2018
  • The higher currency could lead to RBA to further delay raising rates, but is highly unlikely to lead to rate cuts as this would further inflate a residential property bubble

To contact the reporter on this story: Michael G. Wilson in Sydney at mwilson176@bloomberg.net To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net Patricia Lui

--SHAMIM ADAM