An Open Letter to the Australian Dollar

Dear Australian Dollar,

We have some questions for you. First, congratulations on attracting so many buyers in the last few days. You've gone up to .80 cents versus your American dollar cousin. Well done. How much higher do you think you'll go?

You probably can't answer that. But it would be useful if you could let us know. After all, your strength is helping contain inflation in the local economy. If you've reached a cyclical top, that means inflation could quickly get out of control in Australia unless the Reserve Bank raises interest rates again. Have Malcom Edey and Glenn Stevens been sending you roses and chocolate to thank you? And also, if you don't mind us asking, isn't there a danger in all this new-found popularity?

What do all those currency and hedge fund traders do with you once they buy you? Do they shove you in back room to gather dust? Keep you in the green room? Or have they been using you to buy local stocks, and you know, maybe speculate a little bit? Does that mean that when you next go down, you'll take the ASX/200 with you as these traders move on to the next currency that gives out so much attractive yield? Come on, be honest with us, just how important is your strength to foreign investment flows into Australian stocks and bonds. Let us know when you get a chance.

With love,

The Daily Reckoning Australia

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