Aussie Gains to Be Capped as RBA Talks Down Currency

Australia’s central bank probably will succeed in capping the local currency this year as it seeks to boost an economy that’s losing full-time jobs at the fastest pace in two decades, Tokyo-based money manager Diam Co. said.

The Aussie’s biggest annual slide in five years in 2013 didn’t prevent Reserve Bank of Australia Governor Glenn Stevens from reiterating the need for a weaker currency. Diam, which manages about $120 billion, said Stevens probably won’t tolerate Aussie strength while growth remains muted. Daiwa SB Investments Ltd. said it won’t add further to its holdings until the RBA curbs efforts to verbally drive the exchange rate lower.

The Aussie traded at 88.22 U.S. cents as of 9:17 a.m. in Sydney after dropping yesterday to a three-year low of 87.77 cents. It slumped 14 percent in 2013, the most since a 20 percent slide in 2008.

Stevens said the exchange rate was “uncomfortably high” in statements accompanying policy decisions on Nov. 5 and Dec. 3. The RBA board has kept the benchmark rate at a record-low 2.5 percent, having reduced it by 2.25 percentage points since it embarked on the current easing cycle in November 2011.

(Source: Bloomberg)