AUD is still 10-15% too high for the RBA

Paul Bloxham, Chief Economist at HSBC says the AUD is still too high for the RBA’s liking and he now expects the next move downwards to US70 cents. According to Bloxham if the RBA is not able to “jaw-bone” its way to 70c by talking about how overvalued the currency is, it will resort to cutting the cash rate further and reducing the yield on Aussie assets making them less attractive to own. Furthermore, Bloxham says the AUD is “still too high when compared with the level of commodity prices”, which according to Bloxham provides a sense of the RBA’s view of fair value (see chart).