The Australian dollar eased from a fresh 18-year peak against the US dollar on Monday, but demand for high-yielding currencies and a robust economic outlook could see it test fresh highs in the near term.
That upbeat outlook got a further boost when an Australian government agency revised up its forecast for export income from commodities in the year ahead on the back of strong demand for minerals from China.
Australia's Bureau of Agricultural and Resource Economics said it expected income to rise 7 percent in the year to June 30, 2008 to a record A$149.5 billion, compared with an earlier forecast of A$147.6 billion. Australia is a major exporter of commodities and has been riding a global resources boom in the past few years.
"It was quite a hefty revision and indicates strong export performance in the next 18 months and the trade account could narrow," said Stephen Roberts, chief economist at Grange Securities. "Investors are focusing on the strength of the Australian economy and it's only a matter of time before 85 cents is tested."
The Aussie was quoted at $0.8488/8490 against the US dollar, compared with $0.8471/73 here late on Friday. It rose to a 18-year peak of $0.8497 during the day before paring some gains on reports of option-related selling.
The Aussie advanced past the 105.00 yen mark boosted by demand for carry trades, where investors borrow in the Japanese currency to buy higher-yielding currencies like the Aussie or the New Zealand dollar. The Aussie rose to 105.11/21 yen, from 104.91/105.01 late on Friday, though it stopped short of a 16-year high of 105.35 yen hit earlier on Friday. The yen struggled near 4-1/2 year lows against the US dollar on a view that Japanese interest rates are unlikely to rise in a hurry.
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