Australia Central Bank Rules Out Currency Intervention
Australia's top central bank official Friday ruled out intervening in currency markets to rein in the booming local dollar, which is squeezing some industries.
The Australian dollar is trading around 104.34 U.S. cents and has been consistently above parity with the greenback this year, around 70 percent higher than the lows it experienced during the global downturn.
Canberra has previously warned that the Aussie is likely to remain at a high level for years as it comes to be seen as a safe bet amid global turmoil.
But the strong dollar -- which first breached parity with the greenback in October 2010 -- is hurting some local industries, with tourism, manufacturing and education exports particularly hard-hit.
Reserve Bank of Australia governor Glenn Stevens told a parliamentary committee he thought the currency would be trading lower, given slowing global growth and changing circumstances for terms of trade.
"I'm surprised it's not lower, but it's not a significant error," he said, but added that buying massive amounts of foreign currency to put a lid on the dollar's rise would be too risky to taxpayers.
"In extremis, you can argue it should be done but it's a big call and it's not a call we feel should be made at this point in time," he said, effectively signaling that the market will determine the dollar's strength.
He added that a similar move by Switzerland's central bank meant it was now holding the equivalent of 70 percent of the country's GDP in foreign exchange reserves.
"That is a very large sum of money, our reserves are currently about 45 billion-odd (dollars), a tiny fraction of Australia's GDP," he said.
"There are not inconsiderable risks that the taxpayer would effectively take on with extremely large scale intervention."
Source: Agence France Presse
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