AUD/USD: Australia’s turn for negative rate speculation hits the aussie – MUFG

The Australian dollar has continued to underperform undermined by building expectations for further Reserve Bank of Australia (RBA) easing. It has resulted in the AUD/USD rate moving back closer to the 0.7000-level for the first time in almost a month, as per MUFG Bank. 

More:

• AUD/USD to slip towards the 0.7006 September low – Commerzbank

• AUD/USD to target 0.70 after another dovish signal from the RBA – OCBC

Key quotes

“Downward pressure on Australian yields has continued overnight but more at the shorter end of the curve. It follows comments from RBA Assistant Governor Christopher Kent who suggested that short rates could fall below zero. The comments were somewhat surprising given RBA Governor Lowe has previously stated that negative rates are ‘extraordinarily unlikely’ but it was prudent not to rule it out. We still assume that the RBA is unlikely to go down the negative rates route.” 

“The RBA minutes revealed it is more likely that the RBA will lower both their key policy rate and three-year government bond yield target by 0.15 point to 0.10% at their next policy meeting on November 3, and announce a new QE programme to purchase 5-10 year government bonds perhaps up to AUD100 billion. RBA easing expectations are expected to remain a dampener on Australian dollar in the near-term.”