HIGHER interest rates and good news from China are sending the Australian dollar climbing, with some pundits tipping the currency will hit parity with the greenback by mid-year.
The Aussie was trading above US93 at its highest point in almost two months yesterday, buoyed by the release of strong trade data from China at the weekend.
Analysts are split on where the Aussie's climb will peak, but National Australia Bank head of currency strategy John Kyriakopoulos expects the dollar will reach parity by the end of March.
"That would be the first time it's traded at that level since 1982," Mr Kyriakopoulos told Business Daily.
He believes the Aussie will be supported by ongoing interest rate rises in the first quarter of 2010, continuing global growth led by China and downward pressure on the US dollar because the US Federal Reserve is unlikely to raise official rates over the next six months.
Related Coverage
Ex-battler backed to reach parity
The Australian, 4 Dec 2009
Dollar trading half a cent higher
Herald Sun, 9 Nov 2009
China data lifts Aussie
The Australian, 11 Sep 2009
Dollar lower on weak Asian trade
Herald Sun, 25 Aug 2009
Traders hail Aussie dollar
The Australian, 29 May 2009
The Chinese trade figures, which showed imports in December surged 55.9 per cent on a year ago, helped push the dollar to close at US93.09 in Sydney trading yesterday, up almost 1.7 per cent on Friday's close. It was trading above 93 late last night.
"If you look around the globe, which economy has the most to benefit from stronger Chinese growth, then Australia's got to be right up there in terms of being one of the top few countries that can really benefit from that continued strength," said Westpac currency strategist Jonathan Cavenagh.
Gains in resources stocks, boosted by higher gold prices and the upbeat China data, drove the S&P/ASX 200 up 0.79 per cent, or 38.6 points, to a close of 4950.7.
Lihir Gold shot up 2.98 per cent, while BHP gained 1.95 per cent and Rio Tinto 1.25 per cent.
ANZ economist Alex Joiner said gains in commodity prices would help keep the Aussie dollar "relatively elevated".
"We're hearing a lot about Chinese demand ... for iron ore and coal, so that's something that keeps the Australian dollar in favour and certainly it's in favour against all currencies because of that," he said.
Dr Joiner said talk that big miners such as BHP and Rio Tinto were seeking price rises from Chinese steel makers at upcoming contract negotiations was "positive for not only the Australian dollar but the Australian economy generally".
"Regions like Europe, the UK and the US, they don't have this very strong and positive sort of economic sentiment attached to them right now," he said.
