It’s no longer the “little Aussie bleeder” or the “Pacific Peso”. The bad old days of the late 1990s when the Australian dollar hovered at 50 US cent level are gone.
Although it’s been strong now for the best part of 15 months, it has hit new 24-year highs at the weekend and remains there today, well above the 95 US cent mark.
The currency was just under 95.50 US cents at 11am today after earlier peaking at 95.71 US cents. That was a cent higher than the local close on Friday evening in Sydney of 94.50 US.
It was a decisive bust through the 95 US cent barrier that the currency had hit, but not broken clearly above on two earlier occasions this year. The currency could now head towards parity with the US dollar sometime this year if optimism continues about export returns for commodities, high commodity prices and expectations of no easing in monetary policy until 2009.
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Oil prices rising past $US127 a barrel on Friday helped, as did solid rises for other commodity prices (copper and gold).
The stronger Aussie dollar will limit imported inflation to a small extent: it will clip, as it has been doing this past year, the sharp rise in the cost of oil and petrol, and it is boosting the foreign travel business of Qantas, Jetstar and Virgin Blue at a time when they are under pressure from record fuel prices.
It’s also helping our terrible international debt position by cutting the Australian dollar size of the debts held in US dollars, but it is cutting a swathe through the accounts of exporters of all sizes.