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AUDEUR to remain high

first_imgThe Australian dollar has hit an all-time new high against the euro, making Europe a much cheaper holiday destination than ever before. The euro peaked at 85 cents on 20 July, and has remained above the 80 cents mark all July. The new high was in retaliation to a volatile euro zone and recent fears from the US market slowing down. Chairman of the US Federal Reserve Dr Ben Bernanke said further stimulus measures might be needed for America, indicating less than expected growth from the world’s biggest economy. The Eurozone’s problems don’t seem to be improving anytime soon and speculation of Greece returning to the drachma to improve the euro’s health is still an option entertained by some economists and politicians. Treasury Manager for the Bank of Cyprus, Gina Morgan, predicts the Australian dollar will remain high against the euro in months to come. “It’s difficult to make concrete projections for the future given the current market’s volatile state. However, in light of continued uncertainty existing in Europe it would expect that over the next 6 months to see the AUD/EUR remain well supported above 0.7500,” she told Neos Kosmos. In the last 10 years, the Australian dollar against the Euro has spent the majority of its life trading in a 0.48 to a 0.62 range. Since 2010, it has been moving higher and higher, making many economists believe it is trying to find a new trading range. Ms Morgan believes it will settle around the 0.67 to 0.87 range, “with possible outbreaks outside of that range from time to time”. With a high Aussie dollar, many will be spending their dollars overseas with the better exchange rate, shifting money away from the Australian economy. Australian consumers are set to see cheaper prices for overseas products, if the strong exchange rate is passed on. Ms Morgan believes despite the harm some industries will feel, the strong dollar will provide a lower inflation rate and benefit the larger economy. “A strong AUD does make our country more expensive to visit and also to do business with. One area that has received recent attention is the drop in overseas student numbers which, in part, has be attributed to a high-valued Australian dollar. Similarly, tourism has also slowed. However a high AUD is helping ease the impact of tradable inflation and providing benefits to the aggregate economy,” she says. Australia’s stable position is seeing foreign investors lap up the Aussie dollar as a viable, more stable option than the more common American dollar. More investment will see the dollar remain high. “Currently, our financial system is stable just as is our political system which allows for Australia to become a better option for foreign investors,” Ms Morgan says. “Taking all this into account, we can only expect that these demands for Australian denominated assets to move the AUD higher.” So pack your bags, it’s never been a better time to visit Europe. Facebook Twitter: @NeosKosmos Instagramlast_img read more