The Australian dollar's remarkable resilience in the face of falling commodity prices is a potential pitfall for a one-legged economy that could force the Reserve Bank of Australia to cut interest rates again.
This week's national accounts showed that a surge in exports almost single-handedly drove economic growth in the third quarter, a feat achieved with the help of a 6.1 percent slide in the currency that quarter.
However, the trade-weighted Aussie dollar has since bounced back by 5.0 percent even as the price of iron ore, the country's biggest mineral export, continues to probe decade lows.
This makes a repeat of the export boost to gross domestic product growth highly unlikely in this quarter.
So far, the Australian dollar's bounce has yet to ruffle the RBA, which this week skipped a chance to cut interest rates or talk down the currency afresh. The RBA's board meets again next February.
The RBA has switched to a wait-and-see mode since cutting the cash rate to a record low 2.0 percent back in May. Governor Glenn Stevens said there is scope for further easing if needed to support the economy.
If the currency remains strong, however, pressure will mount on the RBA to act and that is one reason analysts such as Michael Turner, a strategist at RBC Capital Markets, expects more policy easing to come.
"Add to this the ongoing downward pressure on the terms of trade, and the exchange rate could again be proving a thorn in the RBA's side even at current levels," said RBC's Turner.
"We continue to expect a further 50 basis points of easing in 2016 and look for AUD/USD to end 2016 at 0.65."
Against the US dollar alone, the Aussie has rebounded more than 4 percent so far this quarter, almost halving a 9 percent drop in the previous period.
It has stayed stubbornly above 70 US cents after recovering from a seven-year trough of $0.6892 in September.
The reasons for its resilience are varied, but it is mostly driven by offshore forces, including carry trades where global investors can borrow at rock-bottom rates, in say euros, to buy the higher-yielding Aussie dollar.
In just the past four weeks, the premium offered by Australian two-year government bonds over euro debt widened by almost 50 basis points to a mouth-watering 248 basis points.
While the spread has narrowed after the European Central Bank's latest round of policy easing fell short of investors' expectations, it remained attractive at 235 basis points.
Additionally, the risk of the US Federal Reserve embarking on a very gradual tightening trajectory could cap the greenback, even as a December US rate hike looked almost baked in.
For the Aussie to realign with falling commodity prices, the RBA may ultimately need to lend a helping hand.
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