A booming economy has given Australia something to celebrate

The Aussie - as foreign exchange traders call the dollar - has risen by 8% against the US currency this year, mainly because Australian interest rates are 3.5 percentage points higher than what can be earned in the US.

Underpinning those high rates is one of the liveliest economies in the developed world, one that has yet to suffer from the global economic slowdown.

"The Aussie's new rippled physique can be attributed to higher commodity prices, a weak greenback and Australia's relatively high interest rates and firm domestic economy," said Craig James of Commonwealth Securities.

The government currently forecasts the Australian economy to grow by 3.75% this year, way in excess of the average likely in Europe or the US.

Southern hemisphere safe haven

Like a handful of other rich-country currencies - notably the Swiss franc - the Aussie has benefited from doubts over the euro.

Jitters over the US dollar, sparked by a combination of recession and terrorism fears, have benefited the European currency - but many traders have looked elsewhere for a safe haven.

Anchored by firm prices for the commodities its exports, Australia has become a natural home for the nervous.

This rebound goes some way to reverse a five-year decline in the Aussie, which in late 1996 was worth as much as US$0.82.

During the 1980s and 1990s, the currency was persistently weak on the international markets, a fact that helped Australian exporters prosper, laying the foundations for the country's current success.

Good news for all?

Now, analysts feel even a resurgence in the US dollar need not be bad news for the Aussie.

"A rally in the US dollar is likely to be associated with a rebound in global growth confidence, probably coincident with a rally in equity prices," which would in turn boost Australian growth, said Greg Gibbs of RBC Capital Markets.

The most negative case for the currency, Mr Gibbs said, would be a "long and protracted war and a persistently high oil price that significantly undermines the global economic outlook and drives commodity prices lower".

But if the currency continues to strengthen, heading back towards the levels it saw in the mid-1990s, that might weigh on exporters - and hence bring Australia's current boom to an end.