The Australian dollar has spiked to a two-year high

The Australian dollar has hit a two-year high, surging back up past the US80c mark.

The current selling off of US dollars in financial markets is causing headaches for the RBA, which has been talking up its hopes for a lower Australian dollar for the last 12 months.

Economists say it probably won’t last however, with forecasts predicting future falls, not more rises.

Capital Economics economist Paul Dales told The Sydney Morning Herald there are two main reasons the dollar would slide back down soon.

Firstly, the RBA isn’t lifting interest rates and secondly, he thinks recent spikes in the iron ore price won’t last.

“In our view, the economy has improved, but it’s too soon to conclude that the battle against slow growth and low inflation has been won,” he said.

“Although economic growth in China has held up better than we thought, the clear slowdown in credit growth suggests it is only a matter of time before overall economic growth starts to slow.”

“The combination of those two developments may be enough to drag the dollar back down to $US70c.”


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