‘Joke’ sends Australian dollar to 3-year low

NO LAUGHING MATTER::A throwaway remark was read as a sign that policymakers had been close to a fresh rate reduction and would now be more likely to cut it next month

AFP, SYDNEY

Fri, Jul 05, 2013 - Page 15

Australia’s central bank said yesterday that a comment from Governor Glenn Stevens that sent the dollar to a three-year low was intended to be funny.

The bank on Tuesday announced the official interest rate would remain at 2.75 percent, with an uptick in the economy expected over time and hopes for a further fall in the mining-powered dollar.

DEADPAN

The following day, Stevens, who has been governor of the central bank since 2006, told a business function in his usual deadpan delivery that policy makers had deliberated for “very” long time to leave the cash rate unchanged.

The off-the-cuff comment was read by investors as a sign that policymakers had been close to a fresh rate cut and would now be more likely to reduce the rate next month.

The Australian dollar fell below US$0.91 to its lowest level since September 2010.

“The governor’s remarks were at the beginning of his speech,” Reserve Bank of Australia Deputy Governor Phillip Lowe said yesterday.

“They were meant to be a light-hearted remark after what he reports to me was a very light-hearted introduction,” Lowe said.

“Some people in the financial markets and perhaps the press have misinterpreted the intention of those remarks,” he said. “I can confirm that the board did deliberate for a very long time.”

“I can also confirm for you that it always deliberates for a very long time,” Lowe said.

CUTS

Helped by earlier cuts to the cash rate, which is at a low unseen since the bank’s establishment in 1959, the Australian dollar has dropped more than 10 percent since early April.

The dollar’s earlier strength, despite a fall in commodity prices, has adversely affected the Australian economy, eroding government revenues and pressuring industries such as manufacturing and tourism.

The dollar was staging a recovering yesterday and had climbed back to US$91.26 in the early afternoon.