The Australian dollar has leapt over the US77¢ hurdle, buoyed by strong Chinese trade numbers and as the greenback crumbles.
The currency was fetching US77.15¢ at 4.50pm on Thursday, a fresh four-month high and extending a rally that has seen it rise more than 5 per cent over the past two months.
The latest push higher was sparked by better-than-expected Chinese trade figures, which pointed to strong foreign demand for the country's goods as well as resilient domestic demand.
Earlier in the session the currency had jumped following dovish comments by US Federal Reserve chief Janet Yellen, who signalled the Fed was neither in a rush to lift rates nor keen to take them too high.
She also noted persistently low inflation, which was the key uncertainty as it was still running below the Fed's goal.
U-turn for greenback bulls
The comments combined to leave markets betting that both the pace and the number of US rate hikes ahead might be lower than previously thought, which in turn weighed on US bonds and the greenback.
"Investors have been sceptical of the Fed's hawkishness in the days leading up to Janet Yellen's testimony and when she failed to sufficiently emphasise the improvements in the economy the dollar U-turned as the bulls abandoned their trades quickly," BK Asset Management head of FX strategy Kathy Lien said.
ThinkMarkets analyst Matt Simpson said much of the currency's rally since May had been down to a weaker US dollar as opposed to bullish bets on the Aussie.
Critical juncture
Mr Simpson said the Aussie was now approaching a critical juncture that had fended off bulls since the 2016 high.
"We think the US77.18¢ resistance could be tested or even broken this session. This is a critical juncture for the Australian dollar as it marks a bearish trend line which has scuppered bullish efforts since the 2016 high," he said.
The 2017 high is US77.50¢ in March, while last year's high point was in April at US78.35¢. The Aussie has risen above US77¢ numerous times since then, but never held on to the gains.
While the Aussie is trading less than half a cent from its 2017 high, most analysts are doubtful the currency will rally much further.
Yield gap to narrow
One argument regularly cited is the expectation that the gap between US and Australian 10-year government bond yields is set to narrow, as the Fed gradually continues to hike while the Reserve Bank of Australia is seen firmly on hold.
A lower yield advantage makes the Australian dollar less attractive for foreign investors.
Late in May the spread narrowed to just 16 basis points, its lowest since March 2001, when the Aussie was trading below US50¢.
Since then yields have risen significantly and the spread is back at 37 basis points, offering more support for the Aussie.
But a number of analysts still predict the spread will hit parity either later this year or early in 2018.
JPMorgan is among those expecting the yield differential to reverse in the US's favour sometime early next year, which should put pressure on the Aussie dollar.