ANZ chief predicts Australian dollar will remain strong
ANZ chief executive Mike Smith expects the Australian dollar to maintain its strength as long as the US Federal Reserve keeps up monthly asset purchases.
"It's unlikely we'll see a huge reduction or a major reduction in the Aussie dollar's strength until there is a tapering in the US," Mr Smith said in an interview on the ABC's Inside Business program. "As the US dollar strengthens, we'll start to see the Aussie come off a bit."
The Federal Reserve decided it would press on with $US85 billion ($90 billion) in monthly bond purchases, saying last week it needed to see more evidence the US economy would continue to improve.
The central bank also said the economy was showing signs of "underlying strength".
While the Australian dollar fell to a three-year low of 88.48¢ on August 5 amid speculation the Fed would begin to taper bond purchases by year end, that sentiment reversed as a government shutdown in the US slowed growth, prompting the Australian dollar to touch an almost five-month high of 97.58¢ on October 23. It closed at 94.38¢ on Friday.
Reserve Bank governor Glenn Stevens said last week the Australian dollar "at some point in the future" would be "materially lower".
Economists in a Bloomberg survey projected that tapering in the US would begin in March, based on the median estimate.
"I don't think the tapering will happen until well into next year," Mr Smith said. "It will create some volatility. There will be adjustment."
ANZ, the country's third-largest lender by market value, had maintained its credit standards, Mr Smith said. Charges for bad debts in the past year fell 5 per cent to $1.2 billion from a year ago, and newly impaired assets in the year dropped 22 per cent, the bank said last week.
"We haven't lowered our standards," Mr Smith said.
"In fact, I think over the past few years we've maintained credit standards very well."