The Australian dollar, currently worth more than 92 cents, has hit a 23 year high. And while cheaper imports and holidays seem fantastic, there is a downside for businesses; in particular for exporters.
"There is a dark side to a strong currency, and if the Aussie dollar runs too hard, there will be segments of corporate Australia that will not have anticipated it," says Nigel Littlewood, CEO, The Rivkin Report. "Just imagine Australian wine producers trying to export their products at twice the price as they were a few years ago."
The expected interest rate rise in November, which will bring rates to 6.75 percent if it goes ahead, is believed to be one of the main culprits of a rising dollar, reported the Sydney Morning Herald.
"The majority of the story is just an adjustment to the fundamentals of the strong Australian economy─interest rates are likely to go up, commodity prices are high and Australia's terms of trade are high," says Richard Grace, Commonwealth Bank of Australia chief currency strategist. "We have the Australian currency adjusting to a combination of these factors."