Reserve Bank of Australia governor Glenn Stevens says he is prepared to put the final nail in the coffin of the "uncomfortably high" Australian dollar if need be.
Reserve Bank of Australia governor Glenn Stevens says he is prepared to put the final nail in the coffin of the "uncomfortably high" Australian dollar if need be.
In a speech on Thursday evening, Mr Stevens said he was "open-minded" on the issue of intervening to drive the Aussie lower, which would involve the RBA selling Australian dollars and buying foreign currency.
Mr Stevens added the Australian dollar was "currently above levels we would expect to see in the medium term".
The RBA governor has complained that the high exchange rate is a drag on the non-mining parts of the economy and hopes to see the Aussie dollar fall below 90 US cents and stay there.
BK Asset Management managing director Kathy Lien said RBA intervention in currency markets was nothing new, as its action at the beginning of the GFC in 2008 demonstrated.
"While their efforts eventually paid off, their initial efforts did not always last and it took nine days of intervention," she said.
On Thursday morning, the US Federal Reserve gave Mr Stevens a little bit of help in getting his wish - a likely winding back of the Fed's massive economic stimulus program.
LTG GoldRock director Andrew Barnett said the Fed's tapering announcement had already strengthened the greenback, with most other major currencies, including the Australian dollar, losing value.
"This is a bit of a game changer for the Aussie dollar," he said.
"If the Fed does start a little tapering in December then we could see the lows of this year between now and Christmas."
The currency's lowest point of the year so far was 88.48 US cents in August.
"It seems, at the moment, the Fed has more control over the Aussie dollar than the RBA," Mr Barnett said.
The Australian dollar has spent most of the past two years above parity with the US dollar, thanks to a combination of US dollar weakness brought about by the Fed's stimulus, and commodity prices reaching 150-year highs.
However, as the Fed winds back its stimulus and the peak of the minerals price boom fades, the Aussie dollar will head lower against other major currencies.
