Travellers Cash In On Strong Australian Dollar
The Age
Tuesday July 8, 2008
TRAVELLERS are taking advantage of the 25-year high of the dollar to pour money into US dollar-denominated travellers cheques for planned trips abroad. The dollar has been trading just cents below parity with the US dollar for two months - levels not seen since the early 1980s. Sales of US dollar-denominated travellers cheques have risen alongside the Australian dollar, according to American Express. A purchase of $US2500 in travellers cheques made at the beginning of July 2008 cost about $A345 less than in July 2007. Consumers have been locking in the price benefit. "In October last year when the dollar hit an 18-year high of US93.4, sales of American Express US travellers cheques were up by 55% based on our previous year's sales figures," said Nick Dinopoulos, vice-president of foreign exchange services for American Express. "When the dollar spiked again this February after pushing past 0.94 (US cents), they were up by 20%." Travellers can look forward to cheaper travel not only to the US but to any country that enjoys a favourable exchange rate against the US dollar. "They are planning their financial travel arrangements well in advance and guaranteeing the biggest bang for their buck," Mr Dinopoulos said. Some analysts are predicting the Australian dollar, which yesterday traded down slightly at US96.11, will overtake the greenback in value. ANZ expects the dollar to be worth $US1.01 in the September quarter this year, helped by high commodity prices and Australia's relatively high interest rates. The Reserve Bank, which held its monthly meeting on interest rates last week, held the cash rate at a 12-month high of 7.25%. That compares with the 2% at which the US Federal Reserve has held its benchmark rate in the hopes of averting a recession. The interest rate differential makes the Australian dollar more attractive to global institutional investors, adding to its strength at the exchange counter. Royal Bank of Scotland senior currency strategist Sue Trinh argues that the Australian dollar is following in the footsteps of the Canadian dollar. The Canadian dollar, also known as the "loonie", achieved parity with the US dollar in September, helped by high inflation, rising interest rates in Canada and soaring commodities prices. The loonie has since come back off its highs and is now buying US98.1. "There are many parallels between the Canadian dollar's performance in 2007 and prospects for the Australian dollar through the rest of 2008," Ms Trinh wrote in a note to clients last month. "As with the Canadian dollar in 2007, we forecast the Australian dollar to not only trade through parity in coming months, but also for the Australian dollar to outperform all G10 currencies in 2008." Other analysts are less bullish, citing the possibility of rising interest rates in the US, a global sell-off in commodities and a renewed aversion to bets on high-flying currencies amid uncertainty in global markets. A survey by Bloomberg of 33analysts showed that the mean forecast for the Australian dollar in the September quarter is US94, or US2 below where it stands today. The appeal of travellers cheques was that people could lock in the cash rate, said Mr Dinopoulos "so regardless of movements in the economy and when trips are taken, the value of travellers cheques is retained".
© 2008 The Age
