Glenn Stevens may have opened the door on currency intervention, yet many Analysts think it's unlikely that he will intervene. It's still a long way off. I think it is highly unlikely that they will intervene in the currency, but as a central bank, you never want to rule out potential policy tools that you can use, ANZ economist Andrew McManus says. It's not just the level. We've seen the Aussie go from 105 US cents in April down to 92 US cents. So the Aussie is moving in the right way for them. So I don't think they need to intervene as long as it is moving in the right direction for them, Mr McManus said.
HSBC's economists Paul Bloxham and Adam Richardson agree... the bar for RBA intervention as very high and unlikely to be met anytime soon. Just speaking about the possibility of intervention was enough to see the Australian dollar sell-off. While the RBA would clearly have welcomed this move, time will tell whether this weakness persists. With much of the weight of the Governor's commentary and the RBA's own modelling indicating that the Australian dollar is not far from fair value and with intervention seen as costly, we still think there is a very high bar set before the RBA would actually consider intervening.
The RBA is in a very tight fix following the last policy meetings where rates were kept unchanged at 2.50 percent. The Chinese economy seems to be boosting the Aussie, but domestic fundamentals suggested otherwise. Will be interesting to see what Gov. Stevens plans to act in the next policy meeting.