Australian dollar hits US85c

The Australian dollar has opened at a 12-month high of US85c this morning and could move even higher this week if retail sales and jobs data shows the economic recovery is gaining momentum.

Amber Rabinov, an economist at ANZ who concentrates on foreign exchange markets, says currency traders will be anxiously watching a slew of data to be released this week, including retail sales for July, consumer sentiment for September and the labour force data for August.

“All of those releases will have key numbers to keep an eye on,” Rabinov says.

She is particularly keen to see the jobs data for August – if the unemployment rate remains in check, then pressure will increase for the RBA to start lifting rates as early as October.

That could push the Australian dollar even higher as investors bet on Australian interest rates moving well above those of Europe, the United States and Japan.

While the rising Australian dollar is bad news for exporters, Rabinov says there could be some relief in the coming months if investors around the world get worried about the sluggish pace of the global economic recovery.

However, Rabinov expects the dollar to remain within a range of US81-85c and says the danger is that the dollar will remain at the high end of this band.

Over 2010, ANZ is forecasting the dollar will head towards the mid-to-high US80c range as the global economic recovery really starts to take off.