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Australia regulator probes unusual pre-RBA spike in Aussie dollar
[SYDNEY] Australia's market watchdog will look into a curious spike in the local dollar moments before the central bank announced its rate decision the previous day, the Reserve Bank of Australia said on Wednesday.
The Australian dollar started to rally in the minute before 0330 GMT on Tuesday, when the RBA announced it was not cutting its cash rate, wrong footing those investors who had positioned for an easing.
The currency jumped nearly half a US cent to around US$0.7823 before the rate announcement and went on to hit a session high of US$0.7845 after the decision was published. The Aussie has since pulled back slightly and was last at US$0.7819.
The early move happened at a time when the market was particularly thin. Traders were mostly sidelined given the high uncertainty surrounding the outcome of this policy meeting, so the sudden spike just moments before the decision has raised eyebrows.
Unsurprisingly, it brought back memories of a recent case when an employee of the Australian Bureau of Statistics leaked sensitive data to a National Australia Bank employee who then used that information to predict fluctuations in the Australian dollar.
Both were arrested by the Australian Federal Police over insider trading offences that authorities said netted them A$7 million (US$5.5 million) on the foreign exchange derivatives market.
The RBA, however, said it has verified that the rate decision was published "exactly" at the scheduled time of 0330 GMT on Tuesday and according to "appropriate procedures".
The RBA announces its rate decision on its website and through agencies such as Thomson Reuters, which have provided the central bank with direct publication control to certain parts of their platforms.
The Australian Securities & Investments Commission (ASIC), the country's corporate, markets and financial services regulator, has been made aware of the matter and is looking into it, an RBA spokesperson told Reuters. "In this day and age of electronic trading, there could be footprints and information which presumably would allow ASIC to investigate. In the olden days when it was word of mouth, it might have been harder," said a foreign exchange trader, who declined to be identified due to the sensitivity of the matter "We've had flash crashes in markets before and various other events, who knows what drove this?" Treasurer Joe Hockey said he had spoken to RBA Governor Glenn Stevens about the matter. "Obviously I was, like he was, concerned about reports that there have been extraordinary trades before the release of the Reserve Bank decision yesterday," Mr Hockey told reporters. "He advised me that he had spoken to ASIC about the matter. I'm satisfied that that investigation will be properly undertaken."