RBA limits AUD strength – Commerzbank

Dr Jörg Krämer, Chief Economist at Commerzbank, suggests that a weaker USD and moderate recovery of commodities prices sent the Australian dollar higher until mid-April.

Key Quotes

“The Reserve Bank of Australia (RBA) is increasingly concerned about this appreciation as the stronger currency is weighing on the bank’s economic and inflation outlook. Hence, it lowered interest rates once again in May, in line with our expectations, thus sending a clear signal to the market that it will not accept any excessive AUD appreciation.

The RBA’s goal is to support structural change away from the mining sector and mitigate the negative impact of lower commodity prices on the terms of trade and the Australian economy with the help of a weaker AUD.

Medium- to long-term, the general stabilization of commodities prices should support the AUD both against the USD and the EUR.”