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Back in April investors took fright when the Reserve Bank of Australia said the value of its currency was "high by historical standards". Their reaction at the time was to sell the Aussie, relegating it to a place among the also-rans. Since then they have clearly become more accustomed to the expression, not least because the RBA has been dropping it into its commentaries and speeches almost as a matter of course. The last time it trotted out the phrase, in the June monetary policy statement, the Australian dollar actually went up because investors had been expecting stronger language.
That is not to say the RBA has given up its effort to depress the Aussie. Assistant Governor Guy Debelle met with some success in that direction when he said in a speech that falling capital inflows would be likely to weaken the currency. He was fortunate that his comment came hard on the heels of a warning by Standard & Poor's that Australia could lose its AAA credit rating if the government fails to reduce spending.
Nevertheless the Australian dollar had a reasonably successful run in May. It was only a fifth of a cent behind the US dollar and strengthened by a cent against sterling and by two and a half cents against the euro.
Some of its success came from the Chinese economic data, which led investors to believe that the slowdown there might be less serious than they previously thought. In general what's good for China is good for the Australian dollar, because of Australia's considerable exports of iron ore and coal to the country. Some of the Aussie's support was the result of stronger ecostats from Australia itself: More than 14k new jobs were added in April, house prices were up by an annual 10.9% and new home sales rose by 2.9% in April alone.
Mostly though, the Aussie did well because volatility in financial markets was unusually low and investors were not scared to take advantage of Australia's relatively higher interest rates. The RBA's 2.5% benchmark compares favourably with the Bank of England's 0.5%, the European Central Bank's 0.25% and the near-zero rates set by the central banks in Japan, America and Switzerland.
And the Aussie could look even more attractive if the European Central Bank delivers the rate cut that investors are expecting it to announce on 5 June. First, though, the Australian dollar will have to face the challenge of gross domestic product (GDP) data for the first quarter of the year. Analysts think the economy will have grown by 0.9% in Q1, a little more than in the last quarter of 2013. If it has, the Aussie will be able to relax a little but a lower number could take away some of its shine.