Aussie dollar

Aussie dollar gains to spur overseas travel

Is now the time to buy US dollars for that overseas holiday? Perhaps it is.

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The Aussie dollar is tipped to rise against the US greenback but how much of that story is good news for travellers?

The local currency briefly rose above $US0.80 last week, for the first time since May 2015, and some economists believe it’s likely to nudge higher.

AMP Capital chief economist Dr Shane Oliver believes the Aussie dollar could travel higher in the near future, before falling.

In the short term the $A could still have more upside, but this is not 2007 – don’t expect a return to parity.”

He added that the trend higher in the local currency will be good for people travelling to the United States, but bad for Australian tourism operators if it continues.

“Any tourist operator who was thinking of expanding must now be fearing that another run to parity is on the way which will destroy the flow for foreign tourists and send locals back to Disneyland for their holidays rather than to North Queensland or Tasmania,” he said.

The local currency has risen against the US dollar as currency traders buy on the likelihood of the US central bank holding on interest rates, political uncertainty around Donald Trump and higher commodity prices.

“The long run trend is that the Aussie dollar can move higher from here in a year’s time to $US0.82,” says St George senior economist Janu Chan.

“We expected the Aussie dollar to be at $USD0.78 by year end. We are expecting some pull back because we think the current rally has gone too far,” she said.

“The US Fed has been more dovish and is no longer the only central bank in the world that is considering tighter monetary policy in the world,” said Ms Chan.

ANZ economist Joanne Masters is tipping the Aussie dollar will be trading around $US0.73 at the end of the year and will largely be affected by calls on interest rates.

“Markets have priced in a rate hike by the Reserve Bank of Australia (RBA) within the next year and rate hike expectations from the Fed have been wound back .

“We still see the RBA on hold for 2018, although the risks are more balanced rather than tilted to the downside, and see the Fed hiking once more this year with further hikes next year,” said Ms Masters.

The RBA board meets to discuss the next move in the official cash rate on Tuesday. The rate is currently at 1.5 per cent

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