Robert Rennie, Research Analyst at Westpac, point out that the RBS guidance shifted slightly shifted today as it noted that “the Australian dollar has depreciated a little”; “remains within the range that it has been in over the past two years”, though the reference to “an appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation” was dropped.
Key Quotes
“This suggests the RBA is happy with the recent drop and with the backdrop of increased concern about the “direction of international trade policy” and signs of “strains in a few emerging market economies”, less concerned about upside risks for the A$. The A$ was unmoved by the RBA statement.”
“Given the continued decline in yield differentials, some pick up in measures of risk aversion but still very strong commodity export prices and rising export volumes, our measures of fair value remain closely tethered to 0.74 suggesting the recent drop sits well within fundamental drivers.”
“Westpac maintains a forecast of 0.72 by mid next year and 0.70 by end 2019.”
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