Aussie dollar looks set to crash through 80c mark, after rapid climb to two-year high

In an unexpected boon for travellers, importers and online shoppers, the Australian dollar has defied almost any economic prediction and, in the past 10 days, steamed in one direction: up.

Since July 10, the Aussie dollar has risen from 76c to nearly 80c on Thursday, and is up nearly 10c from the 71c low it hit last December and in early January.

For the world travellers and internet shoppers among us, this means only one thing.

Your US trip or your overseas purchase is giving you about 10 per cent more bang for your buck than it was at the start of the year.

Cha-ching.

The rapid pace of the escalation of the Aussie has even seemingly staggered economists and analysts, who, let’s face it, usually make predictions that bear little to no resemblance to the ensuing reality.

But still, like those who consult the tarot for the same reason, we continue to ask them what is going to happen.

And the big question those of us with US trips planned for later in the year want to know is, how high will it go?

Can we expect a repeat of those 2010 “parity parties” anytime soon?

The short answer is “no”, according to Matt Simpson, of global analysts ThinkMarket.

But, he said, it’s unlikely we have seen the end of the surge.

“I don’t think 80c is the ceiling,” he said.

But those with something near parity in their sights may be disappointed.

Mr Simpson predicts it will peak at around 83c, but admits, the prediction is nigh impossible.

“It’s come a long way in five months but it’s (prediction) a bit like trying to pin the tail on the donkey.

“But my gut feeling is for the Aussie to continue climbing, the wheels would need to completely fall off in the US.

“It might soften back, the dollar has been climbing for seven months, so you would expect that momentum can’t continue.”

The Aussie dollar has been rising sharply since July 10 in a dramatic climax to an almost year-long climb.

Thursday’s 79.89c mark, which came on the back of the announcement of a steady jobs rate, was a two-year high.

The reasons for the sudden surge are complex and varied but owe much to those two world superpowers, the US and China.

According to the ABC, when a speech by US Federal Reserve chair Janet Yellen quashed the theory the US was in a series of sharp interest rate increases, traders suddenly abandoned the US dollar and started looking elsewhere.

Cha-ching again, Australia.

In China, there was better than expected economic data that highlights the potential demand for Australian exports.

Reserve Bank of Australia Assistant Governor Guy Debelle is due to make a statement tomorrow.

While Mr Simpson said direct intervention was unlikely, the RBA likes to have the exchange rate sitting where it has been for much of the past year, and that is, at the mid-70s mark.

That level is considered ideal for the company’s exporters.

“We know that when we were down in the 70s, the wording from the RBA got softer, they were quite happy at the low 70s,” he said.

“We have to remember the RBA is speaking tomorrow, and, now they might be talking about bringing the currency lower.”

Whatever they do discuss, however, Mr Simpson said it remained unlikely the central bank would raise the cash rate this year.

“What’s so important about this week, is the dollar went above the 2016 high (78.34c),” he said.

“The way prices are moving now is quite exciting, the dynamic has changed, now it’s down to how the RBA play it.”

Originally published as How high will the Aussie dollar go?