High Dollar May Pose Risks, RBA Says

The Reserve Bank of Australia has warned that a strong Australian dollar may pose more risks than gains.

According to the RBA, it is important that the currency is not inflated to much as it may cause it to buck long-running trends. The organization also said that it is likely that resource investment will reach its peak earlier than forecast.

The Australian dollar increased US$0.10 since June 2012. It has reached its four-month high at US$106 cents.

The RBA said that despite China’s slowdown and decreasing prices of commodities, the Australian dollar remains stronger than ever. In its Statement on Monetary Policy, the exchange rate remains high and is a vital part of the structural adjustments that the economy is undergoing.

It, however, cautioned that the high level may be more damaging to the economy than expected.

The RBA is facing calls from economists, manufacturers and unions to step in and manage the currency better.  Since 30 years ago, the Australian dollar has served as a shock absorber to help shield exporters from the decline in global demand.

Investors, however, have been looking for safe places to secure their money.