The New Nation - Internet Edition

AFP, Sydney

Australia's dollar soared to 23- year highs on Thursday on the back of a US interest rate cut and domestic data that heightened expectations Australian rates will rise as early as next week.

The Australian dollar reached 93.42 US cents in early trading Thursday, its highest level since the currency was floated in 1984, before settling back to 93.14 US cents at 1700 (0600 GMT).

Dealers said the US rate cut had widened the gap between US and Australian interest rates, making the currency more attractive to investors. They said strong retail figures out today had also reinforced inflation fears, making it more likely Australia's Reserve Bank will lift interest rates next week and make the interest rate differential even broader.

Westpac chief executive David Morgan said he believed there could be two more Australian interest rate rises in the current economic cycle. Commonwealth Bank chief currency strategist Richard Grace said further rate hikes could see the Australian dollar reach parity with its US counterpart. Apart from the interest rate differential, Grace said favorable terms of trade plus robust commodity prices were underpinning the Australian dollar.

"A return of confidence and fundamental drivers should see the Australian dollar exchange rate undertake an upward adjustment to reflect the 50-year high in Australia's terms of trade," he said.

Official figures showed retail sales rose for a fourth straight month in September, climbing 0.8 percent to 19.86 billion dollars (18.46 US). Macquarie Bank senior economist Brian Redican said the result was "incredibly strong", well above the expected 0.5 percent, and showed Australian shoppers had ignored an 0.25 percent rate rise in August. While the surging currency has been a boon for Australian consumers snapping up cheaper imports, analysts say it will force businesses to increase their competitiveness if they want to maintain an edge in export markets.

Trade figures also released today showed exports fell four percent in September dive in adjusted terms, while imports fell three percent.