Robert Rennie, Research Analyst at Westpac, points out that for 25 consecutive meetings between April 2016 and June 2018 the RBA used the words “an appreciating exchange rate could [or would] be expected to result in a slower pick-up in economic activity and inflation than currently forecast”.
Key Quotes
“Last month this guidance evolved, instead noting that the A$ “has depreciated a little, but remains within the range that it has been in over the past two years”; this month simply that the A$ “remains within the range that it has been in over the past two years”.”
“This could be taken to imply that the RBA is happy with current levels for the A$ and that it is not currently seen as an issue for the current policy mix.”
“This is consistent with our own views here. Given the continued decline in yield differentials, fairly stable measures of risk aversion and resilient Australian commodity export prices plus rising export volumes, our measures of fair value remain centred around 0.75. The A$ thus remains below the mid-point of our fair value range, and thus a ‘non-issue’ for the RBA.”
“Westpac maintains a forecast of 0.74 by end 2018, 0.72 by mid next year and 0.70 by end 2019.”
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