Lee Hardman, Currency Analyst at MUFG, notes that the Australian dollar has weakened modestly in the Asian trading session undermined early this week by renewed weakness in commodity prices.

Key Quotes

“However, the RBA’s policy statement released overnight brought some light relief for the Aussie. The RBA acknowledged that the Australian dollar has appreciated “somewhat recently” which in part reflects some increase in commodity prices and monetary developments elsewhere in the world.

Despite some recent increase in commodity prices, the RBA stressed that it follows substantial declines in recent years and that as a result Australia’s terms of trade remain much lower. It prompted the RBA to caution that an appreciating exchange rate “could complicate” the adjustment underway in the economy.

It is a relatively soft form of verbal intervention which is unlikely to weigh materially on the Aussie. Overall the RBA still appears comfortable to maintain its current monetary policy stance. The description of the economy was updated to acknowledge that economic growth did pick up over 2015, although it remains concerned that inflation is quite low which if sustained provides scope for looser monetary policy.”