Analysts at Nomura explained that the small open economy central banks are dealing with unwanted currency strength in different ways.
"Both the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ) have been quick out of the blocks to talk down their respective currencies, with concerns over the negative domestic macro implications met with some tentative - albeit non-credible - threats of FX intervention.
Such rhetoric is understandable - and should have been largely expected - given that net speculative AUD and NZD longs were close to their five-year highs in late July. Unjustified currency strength - or one driven by a weaker USD and a "global risk bubble" - is like kryptonite for the Antipodean economies.
On the flip side, we've heard nothing from the Bank of Canada (BoC) in response to the sharp CAD appreciation - it has seemingly shut up shop for the summer after hiking rates in July.
We expect the BoC to play catch-up when it comes to taking heed of a strong currency - especially as the delayed disinflation and negative net export effects begin to manifest."
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