Australian dollar firms as traders get over RBA comments

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Australian dollar firms as traders get over RBA comments

The Australian dollar is firmer as traders move past the Reserve Bank governor's comments on rates staying low and focus on the US Federal Reserve.

At 0700 AEDT on Wednesday, the local currency was trading at 87.30 US cents, up from 87.19 cents on Tuesday.

Caught in a currency war.

Caught in a currency war.Credit: Louie Douvis

The unit fell to 86.80 US cents on Tuesday night after RBA governor Glenn Stevens told a business dinner in Melbourne that interest rates were likely to stay at a record low of 2.5 per cent for some time as mining investment and income growth fell and household debt and unemployment rose.

He hammered the point home in the Q&A, telling investors in currency markets they are underestimating the risk of a decline in the $A, indeed a material risk it will go lower, according to NAB.

"Inflation is well under control and is likely to remain so over the next couple of years," he said.

"In such circumstances, monetary policy should be accommodative and, on present indications, is likely to be that way for some time yet."

But the Australian dollar rose above 87 US cents in the hours after that speech.

Bank of New Zealand strategist Kymberly Martin said traders saw nothing new in Mr Stevens' comments.

"He didn't say anything that was particularly surprising," she said from Wellington.

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"It is quite well known the RBA ... still thinks the Aussie dollar is overvalued; it would like to see it lower."

She said the Australian dollar rose again as traders positioned themselves for the Thursday morning release of minutes from the Federal Reserve's October meeting, and for possible clues on an American rate rise.

"That's right at the core of it," she said, adding that traders were particularly interested in comments about wage increases.

AAP

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