Currency Update: After the RBA statement yesterday, the AUD rallied up to 0.8970, before getting sold off to 0.8910, in a matter of minutes

Currency Update: After the RBA statement yesterday, the AUD rallied up to 0.8970, before getting sold off to 0.8910, in a matter of minutes. There were very few developments in the post-meeting statement. Importantly, the Bank reinserted that the exchange rate remains high by historical standards which should clarify that the Bank's preference is still for a lower AUD over any further reduction in interest rates. Australia's current account deficit narrowed to AUD10.1bn (2.6% of GDP) in Q4 from a revised AUD12.5bn (3.2% of GDP) in Q3 2013. The trade balance shifted into a modest surplus in Q4, driven by a solid increase in resource exports and a decline in imports. Net exports are expected to have contributed 0.6ppts to quarterly GDP growth in Q4 2013, less than we expected. As stocks rallied and yields bounced the JPY underperformed all crosses, while emerging market currencies rallied strongly against the USD.