Westpac say RBA is verbally effective

Tom McKay
Tom McKay Livewire

Westpac say RBA is verbally effective. We performed a simple test on 51 different examples of RBA verbal intervention comments (on the level of the $A) that might impact currency markets over the last 18 months. We then broke these up into three buckets. Comments such as the exchange rate remains high went into bucket?1, factual verbal intervention; comments such as it is possible the exchange rate would decline further over time we put into bucket?2, mild verbal intervention; comments like at some point in the future the Australian dollar will be materially lower we put into the third bucket, moderate verbal intervention. We then tested for market impact and results suggest that moderate to strong verbal intervention can impact the market. However, timing is everything and talking about intervention is very different from actually intervening. That is something that markets are all too aware of. Read more: (VIEW LINK)

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