The soaring Australian dollar is profiting importers, pinching exporters, piquing the central bank and perplexing economists.
The Aussie has risen by four US cents to 75 US cents in just 10 days.
The rally has been driven by the Reserve Bank's decision to hold interest rates at 2.0 per cent, strong economic growth figures for the December quarter, and an unexpected leap in iron ore prices this week.
However, not even a 9.0 per cent plunge in the iron ore price on Wednesday stopped the trajectory of the dollar, which usually tracks commodity movements.
The dollar's rise helps importers, like retailers, because it makes it cheaper for them to buy overseas products.
But exporters, tourism and education providers would be feeling the pinch as Australian products and services become more expensive for overseas customers.
RBA governor Glenn Stevens has consistently said the ideal level for the dollar would be about 75 US cents as it helps non-mining sectors of the economy grow by boosting domestic demand and exports.
While the dollar is now around that level, its sudden upswing, and the scintillating pace of the rally, would pique the central bank.
If it climbs further, the RBA may start to see the dollar as a risk for economic growth.
And other central banks aren't easing the pressure by printing more money and fiddling with their interest rates in a bid to boost their flagging economies.
"The monetary easing abroad is a complication for us, as it tends to put downward pressure on the currencies where the easing is taking place and thus upward pressure on the Australian dollar," RBA deputy governor Philip Lowe said in a speech this week.
Despite the RBA's concern, BK Asset Management director of FX strategy Kathy Lien holds the central bank partly responsible.
She said with the dollar refusing to track commodity prices on Monday, the only explanation for its persistent strength may be its steady yield.
"On the eve of another ECB rate cut, investors are valuing the steady two per cent rate offered by Australia," Ms Lien said in a note to clients.
"The Reserve Bank has no immediate plans to lower rates and this high and steady return has made the Australian dollar extremely attractive."
IG Markets strategist Evan Lucas predicted that China's pledge to do whatever it takes to maintain a growth rate of 6.5 per cent could turn the dollar even more bullish.
"The fact that China is now looking to stimulate over the coming months and year means the perfect storm in the AUD is going to become a thunderstorm," he said.
For now the dollar's upward trajectory is holding and although it's only March it's probably a good time to start planning an overseas holiday.
