Why has the Australian Dollar been increasning in value compaired to the US Dollar so much lately?

Question

I think $1 AUD now is buying about $0.89 USD now

(I'm Australian)

Answer 1

The Australian economy is booming so inflation is rising (because everyone has a job and has money so they are pushing up the price of the goods) so the Reserve Bank of Australia (the RBA is the central bank) keeps putting up interest rates.

Putting up interest rates means that it is more expensive to borrow money (decreasing inflation because people stop spending money) but it's also more attractive to start saving (you get a higher interest rate on your bank account).

It's more attractive to save in Australia for Australians, and it's also more attractive for foreigners to put their money into Australian bank accounts. To do this, they need Australian dollars, as more people want Australian dollars, it pushes up the price of the Australian dollar i.e. the exchange rate goes up.

So as long as the Australian economy keeps booming and the interest rates rise, and foreigners want to put their money into Australian bank accounts, the Australian dollar will continue to rise.

On the downside, a strong Australian dollar will mean Australians will buy more imports as they are cheaper but foreigners will stop buying imports because they have become more expensive, increasing the trade deficit - a problem.

Answer 2

Everything is increasing compared to the U.S. dollar. We're on debt to other countrys ( China, Japan, Saudi Arabia, to name a few) to the tune of TRILLIONS of dollars. It's disgusting what's happened since Bush took office. There is no fiscal responsibility at all. Bush's war has been dragging the U.S. toward financial ruin but he just keeps borrowing and spending to keep the war going. Our great grandchildren will be paying for this mess.

Answer 3

I think it's linked to the subprime mortgage crisis in the US.