Aust dollar expected to rise above parity

8 Jun 2012, 4:55 pm   -   Source: AAP

The Australian dollar may rise above parity again following strong domestic data and possible stimulus packages overseas.

It's good news for overseas travellers and bad news for exporters.

The Australian dollar is climbing again, and could rise above parity with it's US counterpart amid speculation further interest rate cuts may be off the table.

The currency has risen sharply against its US counterpart in the past week on news the domestic economy was performing better than expected.

Australia's gross domestic product (GDP) rose by 4.3 per cent in the 12 months to March while almost 40,000 jobs were created in May, data released by the Australian Bureau of Statistics this week showed.

CMC Markets senior trader Tim Waterer said the "surprisingly strong" domestic economy picture caused traders to reassess the outlook for the central bank's official cash rate.

He expects the currency to hit parity with the US dollar again next week and climb as high as 102.00 US cents over the coming months.

"A lot of the sell-off we've seen in recent weeks is based on thoughts on some pretty heavy cutting on interest rates," he told AAP on Friday.

"Based on the latest indicators there is quite a good chance now they (Reserve Bank of Australia (RBA)) may not even cut rates again."

The dollar peaked at 100.05 US cents on Thursday night, before before sliding again, a case of the "parity blues," and fell further after comments from the US Federal Reserve, Mr Waterer said.

At 1600 AEST on Friday it was trading at 98.58 US cents, up sharply from a seven month low of 95.82 cents on June 1.

Markets were left disappointed after Federal Reserve chairman Ben Bernanke played down the prospect the Fed would take further steps to stimulate the US economy.

However, Mr Waterer said it was likely the fed and the European central Bank would eventually be forced to take new stimulus measures as global economic conditions weakened.

That would provide extra support for the Australian dollar by boosting investor confidence and possibly lowering the value of the euro and the US dollar.

"If the situation were to deteriorate further in the US and Europe then the central banks in those two regions will have their hand forced in regards to injecting stimulus into the economy," Mr Waterer said.

He said the results of the Greek elections on June 17 and the next Federal Reserve press conference, where confirmation of stimulus measures in the US are expected, will drive the Australian dollar's movements over the next month.

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