The Australian Dollar Surges

19 July 2012 02:00 - Lucy Williams

The Australian Dollar Surges

The Australian dollar is reaching all-time record highs against its rival currencies including the euro and US dollar. Against the US dollar the AUD has increased to its highest level since May. This comes as positive news after the Aussie reached eight month lows in early June. Following Congressional meetings with US Federal Reserve Chairman Ben Bernanke the Australian dollar began making improvements with evidence that the country’s economy is also showing growth.

Bernanke announced that the Fed were prepared to use further stimulus measures in an attempt to boost growth of a slowing US economy. Robert Rennie, chief currency strategist of Australia’s Westpac, believes that the Australian dollar is currently in an advantageous position while “making itself an attractive investment, particularly in the current economic conditions with low yields around the world”. The Australian dollar is additionally up against the Japanese Yen, marking record gains. The Westpac-Melbourne Institute Leading Index, which predicts the future pace of economic activity, has recognised that the Australian economy is showing signs of life, forecasting further improvements for the rest of the year and leading into 2013.

Bernanke’s commitment of introducing new measures to support the global economy has helped lift confidence in Asia, further strengthening the value of Australia’s currency as China continues to be Australia’s largest and most successful trading partner.

Reports have shown that the Australian economy is at its strongest in ten months, showing boosts in not only the currency but confidence levels of businesses and economists across the country. The Reserve Bank of Australia’s (RBA) met earlier in the month and it was decided that due to the unexpected positive momentum of the Australian economy further interest rates were not needed. The central bank has so far decided to keep its interest rate at 3.5 percent after seeing a 1.3 percent increase in Australia’s Gross Domestic Product (GDP) and stable labour market conditions. Other major developed economies including the US, Eurozone and Japan have set its benchmark interest rate below 1 percent. The Australian dollar is becoming increasingly attractive to investors; another means of ensuring that Australia’s economy will continue to grow.