Australian dollar marks time ahead of inflation data

The dollar continued to circle in a narrow range just above six-year lows today ahead of key inflation data and a Glenn Stevens speech.

The Australian dollar continued to circle in a narrow range just above six-year lows today, ahead of crucial second-quarter inflation data and a speech by the central bank governor due tomorrow.

At 4:51pm, the Australian dollar was trading at US73.58c, down from US73.86c late yesterday.

Reserve Bank of Australia Governor Glenn Stevens will speak on economic policy matters. Coming just after the inflation report, also due tomorrow, the speech will attract added interest.

Earlier today, the RBA published minutes of its July 7 policy meeting, highlighting signs of improvement in the job market over recent months.

Recent data on job vacancies “suggested that demand for labour could be sufficient to maintain a stable or even falling unemployment rate in the near-term”, the RBA said.

Still, the central bank remained cautious overall, noting evidence of spare capacity in the economy, historically low wage growth, while adding that at 6 per cent, the unemployment rate was still elevated.

Slowing population growth had helped stabilise the unemployment rate this year, it added.

Su-Lin Ong, a senior economist at RBC Capital Markets, said the optimistic discussion of the job market was noteworthy. Still, if it was being driven by slowing population growth and record low wage growth, it wasn’t a particularly desirable trend long-term, she added.

The central bank will publish revised economic forecasts in early August.

The RBA indicated that interest rates would remain on hold for now at a record low of 2 per cent, saying incoming economic data would determine whether the current stance of policy remained appropriate.

Minutes from the latest RBA policy meeting suggested an easing bias “of sorts”, said Paul Brennan, chief economist at Citigroup.

Still, the minutes revealed a moderately dovish spin on recent developments and that the board was still unsure whether the current stance “remained appropriate”, he added.

Further easing still could be needed, Mr Brennan said.

The RBA also noted that the Australian dollar had recently fallen to six-year lows against the US dollar, but said further declines were needed against other major trading currencies.

“Although the exchange rate against the US dollar was close to levels last seen in 2009, the decline in the Australian dollar had been more modest in terms of a basket of currencies,” the RBA said.