RBA's Assistant Governor Kent: RBA to make modest changes to how it uses FX swaps

Reserve Bank of Australia's Assistant Governor (Financial Markets) Chris Kent is participating in the Australian Corporate Treasury Association (ACTA) roundtable webinar.

Key comments

AUD would be 5% higher if it wasn't for the RBA policy steps.

Policy measures continue to place downward pressure on the AUD.

AUD currently around the upper end of its range of recent years.

Reserve Bank of Australia assistant gov Kent says RBA to make modest changes to how it uses fx swaps.

Says stimulus policy measures continue to place downward pressure on the Australian dollar.

Estimates A$ 5% lower than otherwise in TWI terms.

Have decided to start acquiring foreign currency via swaps over longer terms.

To acquire long-term swaps over a period of weeks until that part of the portfolio reaches between US$3–4billion.

Transactions will have no effect on the value of the Australian dollar.

Kent says fiscal policy has a key role in recovery, very welcome.

Kent says need a tight labour market to get wages and inflation higher.

Kent says to take some time to close output gap.

Kent says to set monetary policy by focusing on domestic conditions.

Kent says if other central banks pull back on easing, that would lower A$.

Market implications

The Australian dollar is unchanged on the comments despite the jawboning.

That being said, it has already fallen in a significant move from the recent highs to test the 10-DMA and prior structure with a confluence of the 78.6% Fibonacci retracement level of the prior bullish impulse:

At this juncture, an upside correction to at least a 38.2% Fibonacci retracement of the recent bearish impulse might be expected if support holds:

4-hour chart