The Australian dollar jumped back towards one-month highs overnight, shrugging off a new low in iron ore prices after the RBA governor told economists they should “chill out” on the prospects for another rate cut next week. Reserve Bank of Australia’s Glenn Stevens on Tuesday evening told a gathering of business economists that he “happened to agree with” the argument for holding the cash rate target steady at 2 per cent when the board next meets on December 1.
“I’m more than content to lower it if that actually helps, but is that the best thing to do at any particular time?” Stevens said in response to a question on the cash rate. “We’ve got Christmas. We should just chill out, come back and see what the data says.” The local currency traded lower ahead of the governor’s 8pm AEDT speech, which painted a broadly downbeat picture of the long-term prospects for the Australian economy, but quickly recovered and lifted through the night to last trade at US72.45¢, around a one-month high.
The Aussie’s strength was surprising given a further fall in the benchmark price of iron ore, which slumped 1.9 per cent to $US43.89 a tonne overnight, the lowest in daily data dating back to May 2009. The previous low of $US44.59 was set in July. The local currency also proved resilient to Tuesday evening’s shooting down of a Russian fighter jet by Turkey, which spooked world financial markets and lifted the price of oil.