Aussie dollar soars to record high

 

The
Australian dollar has hit a 29-year high and threatens to rise further as
global investors seek exposure to the resources boom.

The
currency hit $US1.0314 in trading Thursday night, a 10.5 per cent jump in the
value of the Australian dollar in less than two weeks.

Westpac chief currency strategist
Robert Rennie said the market has been impressed with the resilience of the
Australian economy in the face of natural disasters.

“If we survived these
cataclysmic events, bearing in mind that Japan is Australia’s second-largest
trading partner . . . then it is no longer seen as a risky currency.”

Market analysts expect the currency
could rise further to around $US1.05, with some economists suggesting it could
even approach $US1.10 by year end.

With Australia’s Reserve Bank cash
rate of 4.75 per cent far above rates in other economies, a relatively small
budget deficit and strong outlook for commodity exports, Australia’s economy
has become seen as a low risk investment, Mr Rennie said.

He said it was also possible that
some of the rise in recent days reflected companies bringing in funds from
overseas to finance corporate takeovers, while insurance funds coming in to
meet flood claims may also be adding to the upward pressure.

National Australia Bank chief
market economist Rob Henderson said he expected the currency to peak at $US1.05
by the middle of the year.

He said it was approaching levels
where the effect on industry exposed to international trade, such as
manufacturing and tourism, would start choking growth in the economy.

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