A jawboning by Stevens knocks dollar

The use of jawboning by central banks has come into focus after a month of intense efforts by the Reserve Bank to talk down the dollar culminated in governor Glenn Stevens last week flagging a possible intervention in foreign exchange markets.

The currency continued its slide last week, closing at US91.83¢ compared with its October high of US97.08¢.

The fall made the dollar the second-biggest loser, after the yen, against its US counterpart this month. The currency had been gaining after sinking to a year's low of just under US90¢ in late August.

Strategists said while the Reserve Bank's jawboning was not the only factor contributing to the dollar's sell-off, it played an important role in its decline. "Linking to the outlook for mining investment has been important," said RBS senior currency strategist Greg Gibbs.

"Over the last month, the significant change that occurred is that Stevens started talking of the need for a lower currency to help the economy adjust, and also at the same time said that [the RBA's] outlook for resources investment had also been downgraded."

Mr Stevens' commentary on the dollar ratcheted up a notch on October 29 when he told a Citi investment conference that "at some point in the future the Australian dollar will be materially lower than it is today".

He stepped up his rhetoric further this month, saying the currency was "uncomfortably high".

Mr Gibbs said Mr Stevens and other RBA officials would not oversell their message. "I don't think there'll be a desire for them to overtalk it. But you've got to keep the impression out there that that's your desire and intervention is certainly a card up the sleeve."