The Australian dollar has experienced a volatile week after Reserve Bank of Australia (RBA) Governor Glen Stevens made an off-the-cuff remark that the RBA board had deliberated on Tuesday about interest rates "for a very long time." The comment on Wednesday sent the Australian dollar tumbling to a three-year low because traders believed Stevens strongly hinted the board was close to cutting rates, making it more likely that a rate cut would occur in August. The dollar fell below 91 U.S. cents for the first time since September 2010 and the probability of a rate cut next month jumped from 37 percent to 58 percent. However, on Thursday, Deputy Governor Philip Lowe sought to clarify Stevens' stance, saying the latter has been "light- hearted" in making the comment.
Currency and interest rate traders who bet that RBA would cut interest rates next month in response to Stevens' public "joke," claim some have lost millions of dollars as a result of a miscommunication by the central bank. "Some people in the financial markets and perhaps the press have misinterpreted the intention of those remarks," Lowe said. Speaking at a global banking forum in Sydney, Lowe said the RBA board meeting on Tuesday began at 9 a.m. local time and finished at 12.45 p.m. as usual. Economists at ANZ, who predicted an August rate cut after Stevens's remarks, have reverted back to their earlier forecast for a November rate reduction. Economists were miffed at the message being pushed by the Reserve Bank that Stevens's comments were a "joke." JP Morgan economist Ben Jarman described Stevens's remark as "puzzling."
"Even taking the comment at face value, it is confusing, given that Mr. Stevens's commentary [after Tuesday's meeting] certainly did not suggest he was in two minds. Markets have interpreted the comment as... meaning that August is a decent chance for a rate cut. "This would be a needlessly indirect approach, given that the RBA has in the past been happy to telegraph in the official statements situations where the call was finely balanced," Jarman said. Traders were agitated by the ostensible about-face by the central phoenix suns 8s for sale bank. The Australian dollar regained more than 1 U.S. cent on Thursday shortly after Lowe's remarks, after previously touching 90.36 U.S. cents in response to Stevens's comments.
At local close on Friday the Aussie dollar was trading at 91.4 U.S. cents, roughly where it began the week -- the local unit opened on Monday at 91.5 U.S. Cents. The high for the week was at 92.5 U.S. cents around midday on Tuesday. Interest rate traders have wound back their bets that the Reserve Bank will cut interest rates in August. Financial markets are pricing in a 46 percent chance of a 0.25 of a percentage point rate jordan 8 phoenix suns cut next month. Aquasia phoenix suns 8s credit strategist Mark Bayley said Stevens had a reputation as a very good central banker. "Whenever markets move there are going to be winners and losers. I'm sure traders are complaining and whinging they lost money."