Investors underestimate chance of $A fall: Glenn Stevens The RBA...

Investors underestimate chance of $A fall: Glenn Stevens

The RBA governor downplayed the significance of the central bank's recent changed description of the Australian dollar.
It had described the exchange rate as "uncomfortably high" but dropped the description as the currency fell earlier in 2014.

There has since been speculation that, with the currency since recovering, the phrase might be resurrected by the RBA.
"It hasn't been, though I don't regard that to be as significant as many people seem to think it is," Mr Stevens said.

He repeated the view that the exchange rate remains high by historical standards and said that some trade-exposed sectors still find it "quite uncomfortable".

"When judged against current and likely future trends in the terms of trade, and Australia's still high costs of production relative to those elsewhere in the world, most measurements would say it is overvalued, and not by just a few cents."

He acknowledged that it was an unusual time, with interest rates near zero in major economies, a factor supporting the Australian dollar in recent years.

"Nonetheless, we think that investors are under-estimating the likelihood of a significant fall in the Australian dollar at some point."
RBA governor Glenn Stevens has cautioned investors against assuming housing prices will always rise, and that the Australian dollar might not fall.