UPDATE 1-Australia dlr whipsawed as RBA says currency still historically high

* RBA keeps rates at 2.5 percent for 7th month, sees stable outlook

* GDP data due Wednesday expected to show economy growing at 2.6 pct

(Adds RBA outcome & comments)

By Gyles Beckford and Cecile Lefort

SYDNEY/WELLINGTON, March 4 (Reuters) - The Australian dollar struggled to make gains on Tuesday after the Reserve Bank of Australia (RBA) described the currency as "high by historical standards", dampening the impact of strong domestic housing data.

The Aussie was back where it started the day at $0.8924

AUD=D4 following a whippy session. It rose as high as $0.8970 immediately after the RBA, as expected, kept rates at a record low of 2.5 percent at its March policy meeting, saying the most prudent course was likely a period of stability. News Search ID:nL3N0M05C3

Later the Aussie pared gains as the RBA renewed in its statement a reference to it being high by historical standards. The Australian dollar gained 2 percent last month, an unwelcome move for the central bank which has long favoured a lower currency to support the economy.

"Last month, when the Aussie was at 87.5 (U.S. cents) they didn't say anything, so they're telling us they don't want the currency above 89 (U.S. cents)," said Annette Beacher, head of Asia-Pacific Research at TD Securities.

Chart support is now found at $0.8874, the 50 percent retracement of the January-February climb.

Gross domestic product (GDP) data is due out on Wednesday and some dealers see upside potential for the currency.

"The Aussie has been given every excuse to go lower, but it hasn't," said David Scutt, a trader at Arab Bank Australia, referring to recent risk aversion stemming from the Ukraine crisis.

He sees scope for the Aussie to rise to the low 90-cents level on an upbeat GDP reading. Forecasts suggest an expansion of 0.7 percent in the fourth quarter of last year compared to the previous quarter. ECONAU

Approvals to build new homes were up a robust 6.8 percent in January, official data showed, handily beating forecasts of a 2 percent rise and supporting the RBA's optimism that low rates are feeding through the economy. News Search ID:nS9N0KH00R

Interbank futures 0#YIB: imply around one-in-four chance of a rate cut by September. Australian government bond futures retreated from a one-month high with the three-year bond contract YTTc1 down 4 ticks to 97.150. The 10-year contract

YTCc1 lost 2 ticks to 96.060.

The New Zealand dollar NZD=D4 held firm around $0.8373, with the prospect of higher rates underpinning the currency.

"This broader story of domestic strength may help to support the New Zealand dollar even in the face of deteriorating global risk appetite," said Bank of New Zealand strategist Kimberly Martin.

Near-term support for the kiwi was seen at $0.8340, with resistance at $0.8390 ahead of a significant barrier at $0.8430.

The ANZ Bank's February commodity price index hit a record high for the third consecutive month, driven by dairy and log exports. That mirrored strong data which showed the country's terms of trade at a 40-year high. News Search ID:nW9N0IO02O

New Zealand government bonds were flat.

(Editing by Eric Meijer)

((Cecile.Lefort@thomsonreuters.com)(+61 2 9373-1234)(Reuters Messaging: cecile.lefort.thomsonreuters@reuters.net))

Keywords: MARKETS AUSTRALIA/FOREX