Reserve Bank Governor Glen Stevens has sent the Aussie dollar tumbling with remarks about it being over-valued. Addressing an assembly in Hobart Mr Stevens hinted at the possibility of interest rates being lowered even further, should the need arise. “Most measurements would say it is overvalued, and not by just a few cents,” said Mr Stevens.

RBA Governor Glen Stevens. Photo:www.abc.net.au

RBA Governor Glen Stevens. Photo:www.abc.net.au

The drop in the dollar will come as welcome relief to struggling exporters. Banks have been put on notice that their predicted end of year cash rate rise may not happen. Traders abandoned the dollar upon Mr Stevens remarks.

The Aussie dollar fell to 93.7 U.S. cents before rallying to close at 93.8 U.S.

Most traders were startled the timing of the announcement. The Reserve bank met on Tuesday, when they decided to keep interest rates stable at 2.5%. Surely the time for such an announcement was then?

Financial experts agree this has been the clearest signal from the Reserve Bank in quite some time. Mr Stevens is well-known for his inscrutability, for him to send such a clear and direct message has some analysts wondering as to his purpose.

Banks have already begun to revalue their mid and long term cash rates. All the big Australian financial institutions were focused on the next cash rate rise, no one had considered another cut.

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