Westpac Banking Corporation said Friday it expects the Australian Dollar to overtake the “Greenback” by the end of the year, after the local currency hit a record of US99.2c overnight.

The Australian Dollar Thursday reached its highest level since it was floated in Y 1983, trading above US99c. The Dollar has since pulled back from its overnight high, and was buying US98.05c at 11:50am AEDT Friday.

Westpac said the weakening USD coupled with the prospect of a quantitative easing (QE-2) program by the US Federal Reserve, effectively printing new money, will see the Australian Dollar’s appeal rise.This is expected to push the local currency beyond parity against the “Greenback” by the end of the year.

“On today’s reading of around US$0.98 or so, the Australian Dollar only needs to keep pace with a fall in the US Dollars of around 4% for it to register US$1.02,” Westpac chief economist Bill Evans said in a statement, lifting the bank’s forecasts on Australian dollar. “That looks extremely likely over the next 2 months or so.”

In light of the strengthening Australian dollars, Evans said the Reserve Bank of Australia is likely to lift its official cash rate in November, and will raise interest rates by 75 basis points over the next few months.

This means the official cash rate will reach 5.25% by 2-Half Y 2011.

“Over the course of the next 9 months we expect the Reserve Bank will raise the overnight cash rate by 75 basis points,” Evans said in a statement. “The Australian Dollar will stand out as one of the few liquid, floating currencies where the central bank is not printing money – indeed it is tightening policy.” —Paul A. Ebeling, Jnr. www.livetradingnews.com

Posted by Shayne Heffernan on Oct 8th, 2010and filed underAsia, Australia, News & Events.You can follow any responses to this entry through theRSS 2.0You can leave a response by filling following comment form or trackback to this entry from your site