The good times for Australians enjoying more affordable travel because of the strong dollar are likely to keep rolling, and there could be some welcome repercussions for those stuck at home, too.
Currently buying a smidge under 71 US cents, the Aussie dollar has been sitting at around three-year highs against the greenback for much of 2026, and is at an even better level against other currencies as a whole.
That's a far cry from just 10 months ago, when it sank to about 60 US cents following US President Donald Trump's tariff announcements last April.
So what's the reason for the turnaround, and how long is it going to last?
POLITICS: Pauline Hanson cops stunning broadside for 'un-Australian' comments
Why is the Australian dollar on the rise?
There are a few reasons at play here.
First up, despite Trump's claim to the contrary, the US dollar has not been doing so great.
"At the current level, the US dollar is around 15 per cent below its mid-2022 peak and circa 1.5 per cent under its 10-year average," Westpac head of international economics Elliot Clarke wrote on Monday.
Trump himself is a factor here, as investors look to limit their exposure to his unpredictable, volatile presidency.
"Investors are concerned that the US is no longer a safe place to park money," AMP deputy chief economist Diana Mousina said.
"Given the US attack on allies like Europe, reframing of international agreements and norms, the erratic nature of policy making from the Trump administration and US sanctions or freezing of foreign-owned US assets, (it's) leading countries to wonder if they are next."
NATIONAL: Council criticised for 'hostile' act aimed at homeless camp
At the same time, the US Federal Reserve has been cutting interest rates while the RBA pulled the trigger on what may be the first of several hikes.
"Another 1-2 rate cuts from the US Fed is likely this year, so even if the RBA keeps rates unchanged, the gap between Australian and US interest rates is widening," Mousina wrote.
"Historically, this has led to the Australian dollar appreciating against the US dollar."
But it's not just against the greenback that the Aussie is performing strongly. The trade-weighted index (TWI), which measures our dollar against a suite of other currencies, is at five-year highs of around 65.
That's partly due to interest rates, which have a lower short-term outlook in other Western economies than at home, but also thanks to surging commodity prices, which have historically boosted the Australian dollar.
READ MORE: Hollywood star's daughter's cause of death revealed
Is the higher dollar here to stay?
Without a reliable crystal ball to turn to, it's impossible to say for certain, but the signs are good – certainly a retreat to 60-US-cent lows appears highly unlikely.
Equally, don't bank on a return to the good old days of the early 2010s, when the Aussie was at and even above parity with the greenback.
"The fair value of the Australian dollar is around 0.72 US cents, relatively close to its current value," Mousina said.
"So, on this measure the Australian dollar may not have much more upside.
"However, (it) has a tendency to overshoot once momentum builds, meaning a short-term move towards 0.75-0.80 US dollars cannot be ruled out.
"That said, such high levels are unlikely to be sustained.
"Over the next few months, we expect the Australian dollar to average around $US0.70-0.75 with a trade-weighted index of around 69."
SYDNEY STABBING: Murder accused had absconded from inpatient care days before stabbing spree
What does that actually mean for the Australian economy?
Obviously a stronger dollar is fantastic for any Australians heading overseas, who get far better bang for their buck than when the currency is trading lower (although it's bad news for tourists arriving here, who'll have to contend with a more expensive holliday).
The same is true for Australian businesses that import goods, however the opposite applies to exporters, whose wares become more expensive to international buyers.
Overall, higher exchange rates can be a slight handbrake on the overall economic growth.
While that's not great news for an economy that is only growing gradually, there's a silver lining here for businesses and borrowers worried about the potential for more interest rate hikes this year: a stronger currency can take the sting out of inflation – which is, of course, the driving force behind higher rates.
READ MORE: Hunt for second man involved in 'horrific' 1998 rape of Victorian teen
"The impact on inflation from currency moves is through 'tradable' goods, items whose prices are mostly set on a global basis, because they are significantly influenced by international trade and competition," Mouisna said.
"Tradables make up 35 per cent of the inflation basket.
"If the stronger Australian persists, then tradable inflation will most certainly have to slow from its current pace of 2.1 per cent…
"The stronger currency could do some of the work for the RBA in terms of reducing inflation."
NEVER MISS A STORY: Get your breaking news and exclusive stories first by following us across all platforms.
- Download the 9NEWS App here via Apple and Google Play
- Make 9News your preferred source on Google by ticking this box here
- Sign up to our breaking newsletter here
The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.
