The Australian dollar (A$) continued its record breaking run this week, surpassing 109US¢, with expectations it will push higher in coming weeks. After breaching parity with the U.S. dollar (US$) in late 2010, the A$ has continued to take large strides during the first four months of 2011, finishing Thursday at 109.25US¢ - 19 percent above the same period last year.
A range of factors have been assisting the record run of the A$, most notably the very weak US$, which continues to lose ground against most major currencies. Additionally, very strong commodity prices continue to underpin the long-term appreciation of the A$.
The big jump in the A$ this week was partly due to the release of the consumer price index for the first quarter of 2011, which showed that prices had increased faster than expected throughout the quarter. This heightened expectations for an increase in official interest rates in coming months.
The recent appreciation of the A$ has only added further to very difficult trading conditions for Australian red meat exporters, already reportedly facing significant difficulties in passing on higher costs to overseas buyers.
The recent surge in the A$ has forced a number of forecasters to take another look at their figures, with 110US¢ and beyond now being widely discussed by the big banks in their immediate outlook.
Reprinted in part from Meat and Livestock Australia