Weekend Economist: Currency cocoon

Stability is sheltering the Australian dollar carry trades of the hedge funds. The end of QE3 could shake that protection.

Over the last six months the Australian dollar had traded in a very narrow $US0.925 to $US0.945 range. It currently stands near the middle of that range. This is despite ongoing attempts from the Reserve Bank governor to “talk down” the Australian dollar. In fact, he materially intensified his commentary on the Australian dollar in his statement following the September 2 board meeting by moving from describing the local currency as “high by historical standards” to a much more sophisticated, “remains above most estimates of its fundamental value”, a follow on from some remarks he made in Hobart previously.


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