Australia’s securities regulator will investigate Tuesday’s surge in the local dollar that came before a monetary policy statement. It’s the third such currency move in as many central bank meetings.
The Aussie jumped 0.7 percent in the seven seconds before the RBA statement was released at 2:30 p.m. in Sydney, data compiled by Bloomberg show. It rose as much as 1.6 percent to
77.11 cents as the central bank held interest rates unchanged, confounding swaps traders that had seen better than 70 percent odds for a reduction.
“ASIC confirms it will investigate a spike in the Australian dollar shortly before the Reserve Bank’s monetary policy decision today,” the Australian Securities and Investment Commission said on Tuesday. “ASIC is also investigating foreign exchange movements shortly before the RBA’s announcements in February and March 2015.”
The RBA has surprised either economists or swaps traders or both at each of this year’s three rates decisions. All three times, the currency has moved in the right direction in advance of the central bank. On March 3, the Aussie rose more than 0.6 percent before the RBA’s decision to leave the overnight cash target unchanged. On Feb. 3, the Aussie had dropped 0.6 percent to 77.49 cents in the 10 seconds before the RBA’s decision to reduce rates was released.
An RBA spokesman declined to comment on Tuesday when contacted by Bloomberg.
The increase in the use of high-frequency trading has spurred concern that algorithm-driven orders can lead to distortions for stock, bond and equity markets around major data releases. Australia’s securities regulator said about a year ago it will conduct inquiries into the nation’s foreign exchange market amid international probes of alleged manipulation of benchmark currency rates.
Computer-driven trading accounts may have been involved, with any sudden moves enhanced by a lack of liquidity in the lead-up to RBA decisions, said Sean Keane, an Auckland-based analyst at Triple T Consulting.
“The move can be amplified simply because an algo is acting without much liquidity on the other side of the trade,” he said by phone. “So the algorithm will simply keep bidding until it finds a price. That may not be anything to do with the early release of information. That may just be price signal response.”
Australian Treasurer Joe Hockey acknowledged the ASIC investigation and declined to comment further on Tuesday’s move, according to Jennifer Clark, a spokeswoman for Hockey.