Central bank intervention by the RBA has tried to stop the excessive volatility in AUD. Of course, it is not the volatility which is the worry but the one direction move of the Aussi dollar which has fallen by 25% since the end of the month. While AUD is off the low, the size of the move is unprecedented.
This AUD move is the flip-side of the yen rally. Delevering has hurt high yielders and caused large gains in the low yielders. This has only be exacerbated by the fact that Australia as a commodity currency has been hit by a the fall-off in metals, oil, and foodstuffs. A recession with high rates in a deleveraging environment is a combination that cannot be easily stopped. We are seeing the currency at early 2003 levels.
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