AUD/USD Skids, RBA’s Lowe Underplays Foreign Rate Influences

Talking Points:

• AUD/USD slipped in the Asia/Pacific afternoon
• Its fall came after RBA Governor Lowe spoke in Perth
• His speech had little new to offer but he did question the link between overseas interest rates and Australia’s

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The Australian Dollar was lower against its US cousin Thursday following a speech from Reserve Bank of Australia Governor Philip Lowe.

Speaking in Perth, Western Australia, Lowe stuck mainly to a precis of post-crisis economics, both globally and in Australia, in a speech which didn’t obviously offer very much for either Aussie dollar bulls or bears. However, the phrase which seems to have done the damage came when Lowe hinted that interest rate rises elsewhere in the world had no “automatic implications” for Australian monetary policy. He also said that higher global rates would in time probably filter through to Australia, but this caveat seemed to have been either lost on traders or ignored.

AUD/USD slipped below the psychologically important 0.80 level following his remarks.

However the currency remains very well supported more broadly, having retreated very little from this week’s new 2017 peak, which is also the highest point in more than two years.

The RBA has in the recent past been scrupulous in airing its worries about the effects of a too-strong Aussie Dollar. However that rhetoric has been toned down more recently still, possibly in recognition of the fact that the “USD” side of AUD/USD has been very much in the driving seat, and that RBA influence over the pair while that remains the case is necessarily limited.

Away from the Australian Dollar, Lowe reportedly responded to questioning by calling cryptocurrencies "very much a speculative play" with no immediate monetary policy implications.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX