Australian central bank says no intervention plans

SYDNEY: Australian central bank governor Glenn Stevens said Friday he had no plans to intervene to weaken a soaring Aussie dollar, which has hit some local industries hard, particularly manufacturing.

The currency has surged in recent years on the back of Australia's commodities boom and relatively high interest rates, trading near or above parity with the greenback for more than 12 months.

But it has hurt trade-exposed sectors with steelmakers and the auto sector shedding jobs in a bid to stay afloat.

Canberra sees a strong currency as the new norm and Stevens said the bank did not intend to enter into a Swiss-style intervention of putting a cap on the currency, at least not yet.

"I'm not tempted to do that at the moment because I'm not sure that it would be effective," Stevens said in his six-monthly grilling in front of the House of Representatives Economics Committee.

"We haven't done any intervention to try and hold the Australian dollar down. I'm not saying we never would, we have been known to intervene, but we certainly don't foreshadow it."

Prime Minister Julia Gillard, who has called a ballot on the leadership of the ruling Labor party for Monday, has said the strong dollar, which was trading Friday at 107.30 US cents, was making the economy leaner and stronger.

While Australia continues to face risks to domestic growth from uncertainty in Europe, Stevens told the committee hearing that the interest rate setting of 4.25 percent was about right for the time being.

"Overall, as of present, it is about where we should be," he said.

"These rates are roughly where we think is appropriate for the circumstances we face."

The Reserve Bank of Australia surprised markets by leaving official rates on hold this month saying global conditions had, on balance, improved and local growth and inflation were close to target.

Analysts had been tipping a 25 basis points cut.

Despite holding firm, several retail banks decided to hike their mortgage rates independently in February, citing higher funding costs despite reporting huge profits.

Asked if the big four banks in Australia -- Commonwealth, Westpac, ANZ, and National Australia Bank -- were too profitable, Stevens said he would prefer them to be that way than non-profitable.

"You only have to look at the dimension of the bank problems in Europe to see that we don't want banks that can't earn a good return," he said.