dollar tipped to top 80 cents, page-4

The Reserve Bank's decision to keep rates on hold may help push the Australian dollar past 80 US cents in coming weeks, according to an economist.

The dollar closed above 73 US cents last week, helped by the RBA's decision to keep the interest rate at 3% and a string of strong economic data. The Australian dollar rose to 76.89 US cents in morning trade, up 20% from its one-year low of 61.17 US cents on October 27, 2008.

"Our hunch is that the Australian at the moment is mainly hinting at the potential for the RBA cash rate to trough at around the current level of 3%," ANZ economist Amy Auster said. "The Australian dollar may still reach higher in the coming several weeks - potentially topping out as high as 78.5 US cents or even 80 US cents," she wrote in a note to clients.

Data released last week showed stronger-than-expected retail sales in March and an increase in employment in April prompting economists to speak about the outlook for an economic recovery.

"On our reckoning, a trough of 3% versus 2% for the RBA cash rate would be worth roughly 3-4 US cents for our estimate of Australian/US dollar fair value," Ms Auster.

Nonetheless, Ms Auster still expects the Aussie to fall back by July with "downside pressures dominating in the second half of this year."

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