Article by ForexTime
The Australian dollar weakened as a result of comments by the Reserve Bank of Australia’s governor on Wednesday.
RBA Governor Glenn Stevens said the prospect of more interest rate cuts remained on the table, but cautioned that too much easing could lead to longer-term dangers through risk-taking and excessive borrowing.
Stevens also noted that the local currency was adjusting lower as desired and having a welcome expansionary impact on the economy.
“A period of somewhat disappointing, even if hardly disastrous, economic growth outcomes, and inflation that has been well contained, has seen interest rates decline to very low levels,” Stevens said.
“The question of whether they might be reduced further remains, as I have said before, on the table.”
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Rates are already at an all-time low of 2.0 percent having been cut twice this year, and the RBA has said that further action is possible given a benign outlook for inflation.
Stevens said he has also been keen to see the Australian dollar “somewhat lower” in order to help offset a downturn in mining investment and commodity prices.
“That adjustment seems to be occurring, with relatively little disruption, and is having an expansionary effect,” he said. The local currency hit a six-year low against the U.S. dollar this week and is down 21 percent on July last year.
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