Australia's export commodity prices edged higher in August, the second rise in a row, following a run of four monthly falls.

The main contributors to the monthly rise in the Reserve Bank of Australia's foreign currency commodity price index were iron ore and gold.

Base metals prices also increased, although the prices of many rural commodities declined in the month, the RBA said.

Commodity prices peaked in July 2011 and are still down by 22 per cent, despite the minor rises in July and August.

In Australian dollar terms, the index rose by 2.7 per cent in August to be 12 per cent lower than in July 2011, with falls in the value of the Australian dollar partly offsetting the drop in prices in foreign currency terms.

Falling commodity prices have helped to spur the RBA's interest rate cuts and to foster expectations that interest rates will stay low for a while.

The RBA said in August that commodity prices were likely to fall further.

"While commodity prices overall remain at historically high levels, the prices of those commodities for which there has been significant investment in capacity in Australia and globally are projected to decline gradually over the coming years," the RBA said in its quarterly monetary policy statement last month.

This outlook has also helped to reduce support for the Australian dollar.

The foreign currency price index is measured in terms of special drawing rights (SDRs), an average of four major currencies - US dollar, euro, Japanese yen, and British pound.

 

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