Australian dollar down after RBA statement

THE Australian dollar dropped after the release of the Reserve Bank of Australia's (RBA) statement on monetary policy.

THE Australian dollar dropped after the release of the Reserve Bank of Australia's (RBA) statement on monetary policy.

The local currency has now shed about six US cents in a volatile week of trading.

The central bank has warned debt crises in Europe and the US could unravel in a disorderly way and drag on Australia's economic growth.

The RBA said sovereign debt problems in Greece and some other European countries had not stabilised completely, while hard decisions were still needed in the US to ensure fiscal sustainability in the long run.

This posed a "key downside risk" for the RBA's forecasts for Australia's economic growth and inflation.

It also comes after the RBA kept the cash rate steady at 4.75 per cent at its board meeting on Tuesday, citing concerns about uncertainty in global financial markets.

The currency was trading at 104.67 US cents prior to the statement's release at 11.30am (AEST), but immediately dropped to 104.38 US cents.

However, it had move back to 104.55 US cents by 11.41am.

The Australian dollar closed at 106.89 US cents yesterday, but was trading above 110 US cents on Monday.

It hit a peak of 110.81 US cents on July 27, its highest level since the fixed exchange rate era ended with its float in December 1983.