The Australian dollar might have some room to appreciate versus the Swiss franc even though the Reserve Bank of Australia (RBA) said on Tuesday the Aussie's "exchange rate remains high by historical standards". In its latest policy statement, the RBA kept its "cash rate unchanged at 2.5 per cent", a stark contrast to Switzerland where the Swiss National Bank's (SNB) keynote three-month Libor rate remains "close to zero."
Traders get paid for being long Aussie and short the franc.
As regards the RBA's allusion to "historical standards", the weakest level for the value of Aussie dollar versus the Swiss franc in the last 20 years was 0.6931 in 2008 compared with its highest level of 1.1767 in 1997.
Trading on Wednesday at 0.8165, the Aussie dollar is closer to the bottom of its range over that 20-year period than to the top. It is demonstrably not historically strong versus the Swiss franc.
If that undermines the RBA's assertion about this particular currency pair, there is also the issue of the comparative economic outlooks.
The RBA noted "recent information suggests slightly firmer consumer demand over the summer and foreshadows a solid expansion in housing construction."
The Australian central bank also acknowledged "resources sector investment spending is set to decline significantly".
Given the Reserve Bank currently sees that the local economy is best supported by an unchanged 2.5 percent cash rate, the RBA might tolerate a slightly stronger Aussie to head off the risk of unwelcome imported inflation.
As for the SNB, "inflation in Switzerland was close to 0 percent for January and February" and "no inflation risks can be identified for Switzerland in the foreseeable future".
"The Swiss National Bank (SNB) is maintaining its minimum exchange rate of CHF 1.20 per euro. The Swiss franc is still high," the central bank said in March.
While the SNB's focus is primarily on the level of the Swiss franc versus the euro, clearly a weaker franc overall would not go amiss.
With the Swiss purchasing managers' index falling to a seasonally adjusted 54.4 points in March from 57.6 points in the previous month on Tuesday, the SNB is unlikely to have changed it opinion.