Australian dollar overvalued: RBA

The Reserve Bank has admitted the Australian dollar is overvalued by about 5¢ but is not high enough for it to intervene. 

In the Freedom of Information documents released yesterday, the central bank said its models and those used by the IMF showed in August estimates that the Aussie dollar is between four and 12 percent overvalued.

"[The situation in]Australia [is] not considered comparable to circumstances which led Switzerland to intervene on foreign-exchange market," the documents said.

They said the AUD doesn't post a near-term risk of deflation nor is it "contractionary" for the economy.

Last week, RBA Governor Glenn Stevens told a parliamentary committee the Aussie was "too high" but insisted the central bank was reluctant to intervene and push the currency lower. .

"To date here my sense is that it is too high... but we're not talking 50 per cent or something like that," Mr Stevens said.

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"You need to be pretty confident that it is seriously overvalued and that the market is behaving in some irrational way before you would launch a large scale intervention," he said.

The bank is considered likely to leave interest rates on hold this month after better than expected news on business investment intentions.

Mr Stevens said markets generally did a better job of setting exchange rates than central banks.

"Markets are irrational much of the time, but somehow, over the broad sweep of history, they have done a better job setting that price than we would have done if we'd been trying to set it."

The Australian dollar is trading around 103 US cents.