In New RBA Term, Governor Stevens Faces Currency War Fallout

Reserve Bank of Australia Governor Glenn Stevens’s reappointment pits the inflation-focused central banker against counterparts using near-zero interest rates and quantitative easing to drive down their currencies.

While Stevens has reduced the key rate to match a 53-year low of 3 percent, Australia’s dollar remains resilient as the yield gap with the U.S., Europe and Japan lures investors. In contrast with Switzerland, which has capped its currency, and New Zealand, which is considering lending curbs to dampen home prices, Stevens has stuck with the cash rate as his main tool.

“Stevens’s biggest challenge is a currency that’s damaging his economy,” said Martin Whetton, an interest-rate strategist at Nomura Holdings Inc. in Sydney. “He’s one of the last hawks. But he’s able to remain one because he’s in the enviable position of having an economy that’s grown for 21 years and isn’t having to resort to desperate measures to keep it alive.”

Bloomberg

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.