Expect to pay more if you’re off to the US or shopping online because the Australian dollar is tipped fall below 90 US cents by the end of the year.
The Aussie is widely expected to rise in the coming months before settling back to levels it was at before the onset of the global financial crisis in 2008.
The median forecast for the currency on December 31 is 88 US cents, according to an AAP survey of 17 foreign exchange professionals.
Until New Year’s Eve rolls around, the Aussie dollar is expected to trade between 87 US cents and 97 cents.
AMP Capital chief economist Shane Oliver said the main factor expected to weigh on the dollar is possible interest rate rises in the United States next year.
“The market will focus more on that and that will act as impediment for the Australian dollar,” Dr Oliver said.
“We’re having a bit of a pause at the moment in the 90s and over time it’ll head below 90 US cents and ultimately I think we’re on our way to around 80 US cents.”
The main reason the Aussie has been above parity for most of the past three years is that the US Federal Reserve’s interest rate has been at zero.
The US central bank has also embarked on a raft of measures to encourage lending to stimulate the American economy.
However, most market watchers believe the Aussie will have one last rally in the coming months.
Dr Oliver said bond buying programs by the European and Japanese central banks to stimulate their economies will encourage investors to move out of those bonds and buy Australian ones.
“That acts as a support for the Aussie dollar but as the year progresses there will be more debate about when the Fed will raise interest rates and that will act as a drag on the Aussie dollar,” he said.
Australian dollar optimists are clearly in the minority, with only two of those surveyed expecting it to get to parity this year.
Commonwealth Bank currency strategist Joseph Capurso expects the Australian dollar to peak at 100 US cents in the coming months before falling to 97 cents by late December.
“We think the US dollar will stay soft against all currencies until the Fed pushes the funds rate into positive territory and that won’t be until late next year or early 2016,” he said.
“We’re quite optimistic about the Aussie economy and we think there’s a good chance the Reserve Bank of Australia will be raising its rate at the end of the year.
“In terms of the interest rates side of the equation we’re quite optimistic and that will be enough to push the Aussie up, at least briefly, through parity.”