“We are of the view that this cut is the last for this easing phase as the lower [Australian dollar] is doing a lot of the work,” HSBC stated in its currency outlook report for August 2013.
The Aussie dollar was trading at around US$1.05 at the beginning of April, but fell to just below 90 cents prior to the August 6 decision to reduce the rate to 2.5 per cent.
Indeed, the RBA in its statement on the decision did still say that the Aussie dollar “remains at a high level,” but added that “a lower exchange rate would help to foster a rebalancing of growth in the economy”.
However, HSBC believes for the most part that the majority of the Australian dollar sell-off may have already happened.
In the report, the bank also points out there is now a monetary policy divergence between New Zealand and Australia, and this is impacting on this currency pair.
However, the HSBC argues “most of this has now been priced in” to the Australian/NZ dollar market, so there is “little scope for further downward movement”.
HSBC does believe that while future cuts by the RBA “are possible”, they will be unlikely in the near term because of the upcoming federal election set for September 7.
According to HSBC analysts, this means the next likely easing opportunity will be in October or November.
