It seems that global investors are catching onto the Australian resources boom, and the value of the Australian dollar is rising as a result.
The Australian dollar hit a 28-year high Monday, hitting $US1.0314, a 10.5 per cent jump in the value of the Australian dollar in less than two weeks. According to the Wall Street Journal, “The currency was buoyed Monday by the same themes that lifted it last week, when the Australian dollar was helped by the movement of insurance companies looking to pay for damages from a slate of natural disasters that hit the country earlier this year.”
The peak can also be contributed to the weakening of the Japanese yen following the earthquake and tsunami almost three weeks ago. The strengthened Australian dollar is also contributed to international corporate flows and stronger risk appetite.
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Analysts are also saying that the resilience of the Australian dollar makes it a strong performer when other currencies are on the decline, including the US dollar. “The Aussie will weaken to 98 US cents by year-end, while New Zealand’s currency will fall to 75 cents, according to the median forecast of economists surveyed by Bloomberg,” Bloomberg reported.
However, some domestic markets are still struggling. Wingate Group chief investment officer Chad Padowitz told The Sydney Morning Herald, “The high currency and high interest rates are affecting the rest of the economy, so the entire corporate sector is not doing that well. Retail sales are quite weak, and higher interest rates aren't good for anybody. I think the Australian market has lagged international markets for some time because of that dynamic. I don't see that changing in a hurry.”
Despite the high interest rates and rush to catch up to international markets, the Australian dollar shows no sign of slowing down.
