The Aussie dollar has hit $1.07 to the Yankee dollar and some are suggesting the ceiling might be still some way off at $1.20 . To put this in a British perspective in 2009 the pound was worth around $2.40 Aussie dollars and is now staring $1.40 in the face. The Aussie dollar is being upgraded due to a number of factors. Partly, it’s  because the situation of the US and UK economies is so dire. Partly it’s because of the Aussie resources boom. The simple excellence of Aussie banking regulation before the Credit Crunch has played a role.  However, the Aussie has also  become a proxy for the Chinese currency which does not itself float on the exchanges. Finally, investing in the Aussie dollar has become a self-fulfilling speculative play where money traders park their cash in dollars because they believe it will carry on going up. With the arrival of that last force – which has all the hallmarks of a bubble – the Aussie dollar has lost contact with Aussie economic fundamentals. And at these stratospheric levels little will remain of the economy outside the resources sector.

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