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While Reserve Bank of Australia (RBA) delivered neutral statement on June 2nd, RBA governor Mr. Stevens was far more specific today over monetary policy expectations and Aussie exchange rates.
- Mr. Stevens cleared the air with dovish verbal intervention. According to him RBA stands ready to act further to push rates lower if economy demand s such and is beneficial for sustainable growth.
- According to him Aussie needs to be much weaker.
Many market participants and economists were expecting that rate has reached its floor of 2% and RBA will now sit tight over monetary policy.
Despite today's communication, RBA is unlikely to jump into action immediately at the next meeting, today's statement can be considered as verbal intervention to keep Aussie weak.
Weakening demand from China and Australia's over dependence on it, especially in terms of exports calling for rate further decisive action from RBA. However as MR. Stevens rightly pointed out that Australia's current owe can't be solved by monetary policy alone and everyone is expecting too much of it.
Aussie is up today on back of weaker dollar, despite Governor's effort to push it down. However he is likely to succeed to keep a cap on Aussie exchange rates. He is also likely to keep intervening verbally.
Aussie is currently trading at 0.778 against dollar, up 1.2% against dollar.
