Thursday, December 5, 2013
Rob Henderson, chief economist for markets at National Australia Bank, agreed most trends were consistent with an imminent taper.
Rob Henderson, chief economist for markets at National Australia Bank, agreed most trends were consistent with an imminent taper. “If you look at global markets they’re certainly beginning to price in the Fed beginning to taper,” he said. “Given the data we’ve seen out of the US with strong manufacturing indexes, good employment numbers, it seems like the economy’s telling them we don’t need all this stimulus.” Foreign exchange and rates markets, for example, are both motivated by a mutual belief that policy change is around the corner. Upward movements in US government bond yields “must mean a higher US dollar ... clearly you’re at the start of a set of circumstances which would put pressure on the Australian dollar”, Mr Henderson said. The Reserve Bank of Australia’s “fairly persistent” jawboning strategy had dealt a further blow to the currency over the past month; it was fetching US90.60¢ shortly after 1pm AEDT, trading slightly lower. Mr Henderson suggested the Fed could accompany any tapering announcement with an equally dovish concession around the employment conditions linked to the Fed funds rate by reducing the unemployment threshold that stands at 6.5 per cent. “That might mean that the reaction is quite muted when it happens,” he said.