The Australian dollar is likely to hit US96c by the middle of 2008, according to National Australia Bank forecasts released today.
The continuing strength of the Australian economy – with 4% GDP growth in 2007-08 – two interest rate rises by the Reserve Bank of Australia and the bottoming out of the US construction industry are all likely to contribute to a soaring Australian dollar in 2008, according to NAB.
And inflation is set to surge to a “disturbing” 3.5% next year, according to NAB, breaching the RBA’s 2% to 3% target band and lifting the likelihood that we will see a third interest rate rise by the middle of 2008.
On the markets today, both stocks and the dollar have declined slightly after yesterday’s strong performance. At midday, the S&P/ASX 200 is down 0.2% to 6775.8 and the Australian dollar is worth US91.97c, down on yesterday’s 23-year-high close of US92.45c.