Australian dollar springs up, but for how long?

The Australian dollar has bounced back to just over US90 cents this morning, but it is still far off the US95 cent mark where it hovered through much of 2013.

OzForex’s chief currency and payment strategist for Asia-Pacific, Jim Vrondas, says momentum looks good for it to get back to 91- 92 cents to the US dollar. However, he isn’t confident it will hold for long. 

Vrondas says the “big risks” are the Australian unemployment figures due out on Thursday, which could see the dollar pushed down below US90 cents again if the unemployment figure falls short of 5.8%.

He says if the Australian dollar doesn’t hold, it could hover towards parity with the New Zealand dollar, which is at US83 cents. They could meet at US85 cents, he suggests.

“The Reserve Bank of New Zealand may raise rates this month,” Vrondas says. “If the Reserve Bank of Australia cuts or at least maintains its easing bias in the next few months, then parity could well be the outcome.”

Pitcher Partners executive director Adrian Fitzpatrick told SmartCompany this morning the dollar is reacting to the “disappointing” US unemployment results released earlier this week.

The US non-farm payrolls report revealed that US employers injected 74,000 jobs throughout December, which was less than half of the forecast figure of 197,000 jobs.

He says the bouncing dollar is having an impact on business plans as people make decisions about investment in the year ahead.

In September 2013, the dollar spiked to around US 95 cents, stemming from the US Federal Reserve’s decision to continue to pump money into the global financial markets.

“It (the bouncing dollar) adds to the uncertainty… at a time when people are trying to make positive decisions and trying to move forward,” Fitzpatrick says. 

“I am not an economist, but it is likely that we will see the dollar bouncing around for some time.”

He says the rocky dollar makes it increasingly hard for those in the manufacturing sector in their struggle against imported goods.

However, for those in Australian retail, he says if the dollars drops lower again, it could help them compete with online orders from overseas.

For the tourism industry, Fitzpatrick says people will wait for the dollar to rise before they book overseas trips.