Latest NewsAussie Dollar Bursts through $us1.05Monday, 15 May 2017

The Australian dollar has pushed its way through the 105-US-cent mark, matching the predictions of some economic commentators that just a few months ago seemed fanciful.

The currency reached a peak of 105.09 US cents shortly before midnight eastern standard time, before edging back slightly to trade around 104.6 US cents this morning.

The latest spike for the currency is considerably higher than the earlier record - which remained unbroken only for a matter of 12 hours - set yesterday after the release of official employment data showed strength in the Australian economy.

And during the offshore trading session, there were also signs the labour market in the US is also picking up.

New York-based 4Cast economist Sean Incremona expects more post-float highs in the future.

"The Aussie seems unable to be stopped," he said. "The most recent better-than-expected employment report (in Australia) has given yet another boost to what has been a strong uptrend supported by favourable yield differentials and soaring commodity prices."

At the moment, Australian investments provide better yields, or returns, in the eyes of foreign investors because local official interest rates are 4.75 per cent. Elsewhere in many parts of the developed world, they are at or near zero. Demand for Australian investment products creates demand for the currency.

"We could see some more post-float highs, but it could also be setting up for ‘the bigger it is, the harder it falls’ type of a situation if and when there is a turnaround," Mr Incremona said.

Overnight, currency markets were affected by a number of factors, including a decision by the European Central Bank to lift interest rates in the European Union for the first time in three years.

A key index of commodities prices rose to its highest level since the financial crisis was the centre of traders' attention in September 2008, gold prices broke new ground on inflation fears and the oil price continued its upward trajectory, with the important West Texas Intermediate crude oil rising through $US110 a barrel in New York trade.

Higher commodities prices generally boost the Australian dollar because the currency is very closely linked with the raw materials produced here. Some believe the dollar could now top $US1.08.

ANZ economist Dylan Eades said the Australian dollar had been boosted by risk appetite, which reflects expectations for economic growth.

Kathy Lien, director of currency research at GFT in New York, said the strong employment data released here yesterday was ‘‘a very positive report for Australia and explains why the Australian (dollar) made a new record high’’.

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