THE Australian dollar's recent rally may be pausing at the moment,but that doesn't mean it has stopped.
Reading between the lines of an interview with Reserve Bank of Australia governor Glenn Stevens this week,there might well be reason to support the Aussie even more than before.
Not only did Stevens play down suggestions that the Australian currency was overvalued,he implied that the RBA wasn't keen to bring it down,either through lower interest rates or market intervention.
On interest rates,Stevens said the Aussie had been benefiting because rates in"global money centres"were at zero,making Australian interest rates,which were cut to 3 per cent from 3.25 per cent earlier this month,still attractive even though they were already at historic lows.
Although the RBA could cut interest rates further,the RBA governor talked about the"limits to fine tuning".
Analysts at National Australia Bank said that with Stevens also making it clear that he did not want to preside over another upturn in house price inflation,the RBA was unlikely to keep on cutting the cash rate to 2 per cent or below next year.
So there is little reason to expect that Australian interest rates are going to seriously undermine the attraction of the Australian currency at this stage.
Although there have been rumours in the past that the RBA has attempted to massage the Aussie lower with covert market intervention,Stevens also made it clear in a rare newspaper interview that this was not an option he was pursuing actively at the moment.
He said that for intervention to work in driving the Aussie lower,the RBA would have to buy US dollars,which would leave the central bank with a negative carry position,given that US interest rates are essentially at zero.
On top of that,the RBA would be taking the risk of amassing US dollar reserves that could then decline in value.
So,in short,it looks as if the RBA would not stand in the way of further Australian dollar gains at the same time as the currency could find itself becoming more attractive to the international investment community.
After a year of worrying about a global economic recession and the impact this could have on commodity-reliant countries like Australia,investors are ending the year in a more upbeat mood.
The global recovery may remain uncertain but,with the US now showing more consistent signs of an upturn and China pledging itself to more growth-oriented policies,the export prospects for Australia are probably looking better now than they have for many months.
On Tuesday this week,the World Bank raised its growth forecasts for China and Asia,lifting its 2013 Chinese GDP estimate to 8.4 per cent from a forecast of 8.1 per cent in October.
