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AUD falls as RBA considers intervention in forex market

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The Australian Bureau of Statistics released a preliminary retail sales figure on Wednesday, which showed retail sales fell 4.2 percent (month-on-month) in September, following a 3.2 percent rise in the previous month.

AUDLast week, the Australian dollar fell 3.59 percent against the US dollar, snapping a two-week winning streak.

Reserve Bank of Australia Deputy Governor Guy Debelle on Tuesday voiced his concerns about the value of the Australian dollar, defying the expectations of analysts who thought he would not comment on the matter due to the belief that the Australian dollar is late. performance was mainly linked to the weakening of the US dollar. Last week, the US dollar rallied against a pack of its major rivals, gaining 1.85 percent and recovering from the previous week’s losses.

Debelle stressed that a lower exchange rate would benefit the economy, which markets interpreted as opening up the possibility of intervening in the foreign exchange market to lower the value of the Australian dollar, something similar to what the Swiss National Bank is doing to stop appreciation. from francs

The lieutenant governor also left the door open for further interest rate cuts, as follows The RBA may eventually consider introducing negative cash rates, although he pointed out that there is still room for cash rates to fall without going into negative territory. On this alternative, Debelle noted that the evidence on its effects on the exchange rate is mixed.

“Empirical evidence on negative rates is mixed. They may contribute to a lower exchange rate in the short term. In the medium term, efficiency may decline, including through the impact on the financial system” he said, adding that this can encourage households to save more, especially in environments where they are inclined to do so.

The Reserve Bank of Australia’s monetary policy committee is expected to meet next week and then announce its monetary policy decision. Until then, it may not be clear whether they are willing to consider this alternative or not.

Last week, the markets received important information about the state of the Australian economy. On Tuesday, the Commonwealth Bank of Australia, along with the market economy, released a preliminary Commonwealth Bank Services PMI for September, which stood at 50, pointing to an expansion in the services sector. In August, the indicator was at 49, signaling a decline in the sector, while analysts expected it to be at 48.4. The manufacturing PMI, which stood at 55.5, showed faster expansion in the manufacturing sector compared to 53.6 in the previous month. Analysts had forecast a contraction as they expected it to be at 48.3.

The composite PMI was 50.5, indicating an expansion in the business sector. The figure from the previous month signaled a decline when it stood at 49.4. The Australian Bureau of Statistics released a preliminary retail sales figure on Wednesday, which showed retail sales fell 4.2 percent (month-on-month) in September, following a 3.2 percent rise in the previous month.

On Friday, the Australian Bureau of Statistics reported that the preliminary trade balance for August recorded a surplus of $4,294 million, after standing at $4,607 million the previous month. Imports fell 7 percent after rising 7 percent in July, while exports fell 2 percent after falling 4 percent the previous month.

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