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RBA review: AUD fair value key focus - RBS

FXStreet (Bali) - The RBA publishes its interest rate decision tomorrow, with the language towards the AUD the key market interest, notes RBS, following the sharp move lower in the domestic currency since the last meeting took place.

Key Quotes

"The RBA meets this week, and AUD/USD has fallen over 6% since the close on September 2nd, when the RBA last held a policy meeting.

The RBA described the exchange rate in Sept as “…above most estimates of its fundamental value, particularly given the declines in key commodity prices.” The end of that phrase, about commodity prices, is likely key to whether they retain that language.

As commodity prices broadly have slipped along with the AUD, the RBA may still see the AUD as out of line with fundamental drivers. Employment data are also released – after a record-large surge in August employment, led largely by part-time employment, there is a risk of a pull-back in September.

Declines in AUD/USD to new 2014 lows may put Governor Stevens’ late-2013 comment into focus about AUD fair value.

At the time, he said of AUD fair value "I thought 0.85 would be closer to the mark than 0.95, but really, I don't think we can be that precise."

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