The Australian dollar is so strong that it is beginning to be looked at internationally as a reserve currency.
Whatever the reason it can’t be simply because it has been talked up by Julia Gillard. In February the Prime Minister predicted: “Our dollar is likely to remain relatively high for years to come.”
Maybe the reason lies in a conjunction of the planets. Asia’s dependency on Australian minerals, and the accessibility of these, is one factor. That demand has largely driven the mining boom. Line that up with the volatility of other markets, including the USA and Europe, and the Australian dollar starts to look very attractive to global investors.
A strong currency is meant to hurt manufacturing and export but Australia continues to be able to sell its iron, manganese and coal in Asian markets. And now it has become the number one exporter of liquid natural gas (LNG) to Japan, knocking Qatar into second place. Figures just published by Japan’s government show that it imported close to 16 million tonnes of Australian LNG in 2012, 18.2 percent of its total requirement. Qatar and Malaysia supplied 15.6 million and 14.6 million tonnes respectively.
Australia has plenty of LNG reserves. Maybe the day of reckoning is at hand, right now though it looks as if Gillard could be right.