On the other hand, share markets in many countries have recovered strongly and some of the earlier exchange rate moves have also been largely reversed. The Australian situation Despite the fact that Australian banks are in very sound condition and have been experiencing minimal credit losses, they were nonetheless affected by the spread of the global money market turmoil.
In addition to the rise in the policy rate, the central bank focused on the short-end of the yield curve, draining excess liquidity from the inter-bank money market and pushing up short-tenor rates. Consequently, not only did the overnight rates remain close to the discount rate through most of the year, the volatility in these rates also declined.