There has been a lot of focus on the recent lift in the level of the Australian dollar. The currency rallied to a nine-month high of around USD0.7675 last week. This was largely driven by the improvement in commodity prices, in particular the strength in iron ore prices, but also thanks to a weaker US dollar.
While the stronger Aussie is great news for households, it is not in the best interests of the broader domestic economy – especially in light of the efforts by the RBA to support the rebalancing of the economy away from the mining investment downturn.
If the currency remains persistently high in coming weeks, it may be that the Reserve Bank once again starts the process of “jawboning” – talking down the Aussie or even cutting interest rates again to push the currency lower.
It threatens to be a quiet week, but at least it’s a four day one.
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