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For the third time, the Reserve Bank of Australia has intervened to support its currency which has dropped to a 5 year low against the US dollar.

Over the past month, the AUD/USD has fallen 25 percent against the greenback and 35 percent against the Japanese Yen.

As much as we applaud RBA Governor Glenn Stevens’ efforts, non-coordinated currency intervention rarely works.

Intervention has rarely resulted in a medium term top or bottom in a currency pair. We last saw that with the the Reserve Bank of New Zealand intervention in June 2007. The NZD/USD sold off for 200 pips, but it then quickly recovered those losses and went on to hit a 25 year high 2 months later.

NZD/USD Chart - June 2007 Intervention

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