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Australian dollar not overvalued says RBA chief.
Published on 10.02.2017 18:16

The Australian dollar remains virtually unchanged in late in the Asian session today after an upbeat speech by the Reserve Bank of Australia governor Philip Lowe and a speech by US president Donald Trump.

At 3.35pm (AEDT) the Aussie dollar was trading at US76.42c up from US76.39c in yesterday’s trading.

Even though the Australian dollar has been one of the world’s best performing currencies this year with some calling into question it’s sustainability, governor Lowe noted in a speech earlier today that the central bank was not to concerned at the moment,

"It's hard to say that the exchange rate is fundamentally too high”,  Mr lowe noted, “that might change, he said, were the global outlook or global interest rates to shift, but on present circumstances, I struggle to say the configuration is leading to growth outcomes that aren't satisfactory."

The governor also noted that the RBA was taking a wait and see approach and should the situation change in the nearest future some adjustments may have be made,

“If the global outlook were to change and the exchange rate/interest rate combination led to growth being downgraded, then you could make the case that the exchange rate was too high," he said. "But at the moment I struggle to say the configuration is leading to growth outcomes that aren’t satisfactory.” he said. 

The currency experienced some volatility earlier in the day after Trump said that he would release his tax plan over the next few weeks and that it is going to be phenomenal.

If he announces his proposed plan which includes significant tax cuts the Australian dollar may come under pressure after the announcement,

 “The market has got fairly excited around commentary to US airline CEOs, such as we are going to be announcing something over the next two or three weeks that will be phenomenal in terms of tax” noted IG chief market strategist Chris Weston

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Andrew Masters

Analyst

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