Dollars smashes 90c barrier

The Australian dollar has surged past US90c to be trading at a 23-year high of US90.13c at 12.21pm today – and it could go even higher.

The fading memory of the international credit crunch, US economic weakness, an improved global economic outlook and Australia’s domestic strength are behind the current strength of the dollar, according to Commonwealth Bank currency analyst Besa Deda.

And speculation is mounting about just how high the dollar can go, with some predicting it could reach parity with the US dollar by the end of this year.

“The Commonwealth Bank view is not for parity at the moment, but certainly you can’t rule it out, especially if these current trends continue,” Deda says.

Data later this month could be central to the fate of the dollar, especially CPI figures due on 24 October. If those figures suggest inflationary pressures are building up, the Reserve Bank could be forced to lift interest rates, a move that would be likely to put a rocket under the dollar.

However, that outcome may be averted if the US economy manages a turnaround. US jobs figures released on Friday showed an additional 110,000 jobs were created in September, an above-expectation result that suggests the US economy has not been crippled by the housing crisis.

The strong result pushed the US Dow Jones Industrial average up 0.7% to 14,066.01 on Friday, close to a record close. The strong US result flowed through to Australia this morning, the S&P/ASX 200 lifting 1.1% to 6677.4 by 12.38pm.



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