NAB FX Strategy Research notes that the RBA’s concern with AUD rate is not whether it appreciates too much or too little, but rather whether the currency deviates too much from its fundamentals.
“The AUD RWTI is now over 10% above its equilibrium level. Similar deviations in the past have triggered 1) a change in RBA commentary on the currency and in some cases 2) RBA rate cuts,” NAB adds.
“While the chances of the RBA cutting rates over the coming months are negligible, we think the Board has the arguments to increase its level of discomfort with currency in the Statement tomorrow, if they so choose to,” NAB argues.
Source: NAB Research
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