SYDNEY/WELLINGTON: The Australian dollar pushed higher on Thursday after a top central banker remarked that the currency was now much closer to fair value than at any time in the past few years.
Reserve Bank of Australia (RBA) Deputy Governor, Philip Lowe, also said low interest rates were proving less effective in spurring economic activity than in the past. The market reacted to his comments by driving the Aussie up to $0.7840, from a session low of $0.7804.
Much of the gains have since evaporated, leaving the Aussie just a touch firmer on the day at $0.7825. It remained stuck in a slim range held since reaching a six-year trough of $0.7627 a month ago.
Asked where he thought fair value for the Australian dollar was, Lowe said: "We're much, much closer to it than we were at any time over the past couple of years.
Against the US dollar, we've come down nearly 30 cents since its peak, so that is a very large adjustment."
"I think we can now see the effect of that in the economy," he told a conference in Sydney. Lowe was quick to add that he suspects the currency was still too high given the sluggish economy, but gave no hint on where he thought fair value was.
Interbank futures took his comments in their stride with the May contract slipping a tick to 97.970, implying a cash yield of 2.03 percent and a near 90 percent chance of a quarter-point easing.
The Aussie was slightly firmer against the yen and the euro. Versus its New Zealand peer, the Aussie bounced to NZ$1.0349 , from an all-time low of NZ$1.0272.
The New Zealand dollar was consolidating early gains that also saw it hit a lifetime high on the euro and scale a six-week peak against a currency basket.
Against the greenback, the kiwi dipped back to $0.7555 , having peaked just above 76 cents earlier. The euro, which plumbed a record low of NZ$1.4544, was last at NZ$1.4649.
The euro has been under broad pressure ahead of a European Central Bank meeting where it should offer details of its 1 trillion euro bond buying campaign.
New Zealand government bonds slipped, pushing long-dated yields two basis points higher.
Australian bond futures were subdued with the three-year contract off 3 ticks at 98.070. The 10-year contract was flat at 97.4050.
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