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HindustanTimes Thu,28 Aug 2014

World

Bank chief's 'joke' sent Australian dollar to 3-year low
AFP
Sydney, July 04, 2013
First Published: 11:26 IST(4/7/2013)
Last Updated: 13:54 IST(4/7/2013)

Reserve Bank of Australia governor Glenn Stevens told a business function in his usual deadpan delivery that policy makers had deliberated for "very" long time to leave the cash rate unchanged. Australia's central bank said that the comment, which that 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.

The following day, Stevens 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 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 91 US cents 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 Thursday. "They were meant to be a light-hearted remark after what he reports to me was a very light-hearted introduction.
   
"Some people in the financial markets and perhaps the press have misinterpreted the intention of those remarks."
   
"I can confirm that the board did deliberate for a very long time," Lowe added. "I can also confirm for you that it always deliberates for a very long time."
   
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 squeezed the Australian economy, eroding government revenues and pressuring industries such as manufacturing and tourism.
   
The dollar was recovering Thursday and had climbed back to 91.26 US cents in the early afternoon.


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