Fires not likely to spark a material change in flows
ANZ Research notes that the impact of reinsurance flows (related to the current Australian bushfires) on AUD likely to be limited.
"Natural disasters have complex ramifications for both the economy and the FX market. On the one hand, some natural disasters negatively impact growth (both directly, and through sentiment channels) and by extension have led to policy responses that have weakened the affected currency.
Early assessments suggest the damage to physical capital, as a share of GDP-producing capital, will not be large enough to have an reinsurance flow impact on the AUD," ANZ notes.
"As it happens, we were already forecasting a 25bp February rate cut from the RBA, and that call is unaffected by the current assessment of the impact of the bushfires," ANZ adds.
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