Australian Dollar Little Changed on RBA's Mixed Message

 
   By James Glynn 
 

        SYDNEY--The Australian dollar ended a mixed session in Asia Wednesday little changed after central bank Governor Glenn Stevens said interest rate cuts were still possible, but warned of rising risks in the housing market.
        At 0700 GMT, the Australian dollar was trading at US$0.7426, up from US$0.7410 late Tuesday.
        While interest rate cuts remain "on the table," Mr. Stevens said, at a certain point, low interest rates can become dangerous.
        "It is not quite good enough simply to say that evidence of continuing softness should necessarily result in further cuts in rates, without considering the longer-term risks involved," Mr. Stevens said in a speech to a charity organization.
        Economists said the Reserve Bank of Australia retains a bias to cut rates again, but the hurdle to do so is high as house prices, especially in Sydney, have risen sharply in the last year from already-elevated levels.
        Mr. Stevens was also more upbeat on recent economic data, welcoming recent signs of improvement in pockets of the economy such as business conditions and the job market.
        Unemployment has fallen in recent months toward 6.0%, defying RBA forecasts that it would head toward 6.5% this year and remain there for some time.
        "The state of the labor market, while still somewhat subdued, appears to be better than we had expected three or six months ago," Mr. Stevens said.
        Earlier, second quarter inflation data proved benign as expected, giving the RBA room to lower interest rates if it wants, economists said.
        Consumer prices rose 0.7% in the second quarter from the first and 1.5% from a year earlier, the Australian Bureau of Statistics said Wednesday.
        Economists had expected prices to rise 0.8% on quarter and 1.7% from a year earlier.
        Interest rates will remain on hold for the remainder of the year, said John Peters, senior economist at the Commonwealth Bank of Australia.
        "The RBA is currently much more concerned about the growth outlook than inflation, with the slow transition from mining investment and activity to a pick up in non mining investment and activity feeble," he said.
        -Write to James Glynn at james.glynn@wsj.com
        (END) Dow Jones Newswires

        July 22, 2015 03:25 ET (07:25 GMT)

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