Australian Market Strong As Dollar Hits 28-Year High

There has been a 10.5 per cent increase in the value of the Australian dollar in the last two weeks putting almost on par when it was first floated in 1983.

RBS (Royal Bank of Scotland) chief currency strategist Greg Gibbs said both share and currency markets throughout the Asian region had been helped by the actions of the Bank of Japan in pumping money into circulation in response to the earthquake and tsunami disaster.
However, he said there were enough risks in the world economy, including the fate of the Japanese economy, that meant the Australian dollar’s rise may soon reach a limit.

CMC Markets foreign exchange dealer Tim Waterer says rising gold and oil prices are also adding support to the local dollar and currency traders are uncertain where the short-term top could be for these commodities. “That’s certainly driving the Australian dollar higher,” he said. “There does seem to be a lot of upside to the gold and oil prices and that will lend support to the Australian dollar.”

Westpac Bank chief currency strategist Robert Rennie said it was also possible that some of the rise in recent days reflected companies bringing in funds to Australia from overseas to finance corporate takeovers, while insurance funds coming in to meet flood claims may also be adding to the upward pressure.