1 Aug 2011

Pros and cons of high dollar

7:00 am on 1 August 2011

The Australian currency is now seen as a safe haven by international investors.

The dollar topped $A1.10 to the United States last week, levels it has not seen since being floated nearly three decades ago.

While part of that is due to the self-inflicted damage the US is doing to its own currency, the Aussie dollar is increasingly been seen by investors elsewhere as a safe port in the storm.

With the US at risk of losing its top-tier credit rating, Radio New Zealand's Sydney correspondent says Australia is one of the few AAA-rated countries left.

Judging by credit default swaps, Australia is now judged to be a better bet than both the US and Germany.

Its currency is seen as an easy-to-trade proxy for China and it offers a high yield.

While this is good for importers and Australians travelling abroad, it's a nightmare for labour intensive industries such as retailing and manufacturing.