The Australian dollar has found strength in factors that used to hold it back, such as a commodities-based economy. But forecasting exchange rates can be tricky
Not so long ago, Australia's currency was among the least traded and least desired in the western world. It was dubbed the "Pacific peso" when it briefly hit an all-time low of 47 US cents in 2001.
Back then it was being blamed on Australia's status as a quarry. The country was good at digging up raw materials that would then be sold back to Australians as computers and TVs at vastly inflated prices.
A decade on and the Aussie dollar has flirted with US parity. Its rise has been hailed as the by-product of a strong economy; an economy based on Ö still being a quarry.
Raw materials now account for 70 per cent of Australia's exports and nobody is complaining. Commodity prices for commodities including coal, copper, gold and wheat have soared over the past 18 months, taking Australia's terms of trade to its highest since the 1950s.
Just as the US and other major industrial countries are moving towards more monetary easing - and are fully engaged in a round of competitive devaluation - Australia's central bank looks set to raise interest rates and widen the rate differential between the Australian dollar and the rest.
What happened in the decade since the peso taunt? Australia is the only country in the Organisation for Economic Co-operation and Development not to have succumbed to recession during the global financial crisis.
Its public debt is non-existent and it appears to be well managed. It is a place where investors can play the China story at a safe distance.
There are, of course, winners and losers with a surging currency: importers, the big local retailers and the airlines that use Australia as a hub (Qantas, Singapore Airlines, Virgin) have all gleefully watched the rise of the Aussie dollar.
Consumers are also the obvious beneficiaries of cheaper imports. Those TVs and computers are getting cheaper and cheaper. Businesses also have access to foreign capital equipment at lower costs.
Contrast this with the trade-exposed sectors of the economy such as home-grown manufacturing, agriculture, tourism and international education.
Companies with large offshore earnings, including Ansell, Macquarie Group and Computershare, are all likely to be hit with earnings downgrades due to the high dollar.
Even with the best hedging strategies, the strong dollar will also put a dent in farm earnings. Car and lorry makers are not doing much better. The woes of local car makers Holden and Ford started when consumers switched to smaller, more fuel-efficient vehicles.
Importers such as Toyota and Honda filled the need. Lately the Chinese have arrived with the cheapest vehicles on the market. The local makers are clearly being priced out of the market.
Is the rise of the dollar sustainable? Exchange rate forecasting has never been a science - there are just too many variables - but most believe parity to the greenback is here to stay for some time yet.
Chris Richardson, one of Australia's leading macroeconomists, says that as long as the Australian dollar is being traded as a proxy for exposure to Asia, it will maintain much of its strength.
But there are other factors at work. Mineral price forecasters predict big falls in Australia's two key exports - almost a halving in iron ore prices, and a similar cut for coking coal prices.
"If that turns out to be right, then the Australian dollar won't stay near parity," says Mr Richardson.
His view is the Australian dollar will average about 80 US cents for the next decade.
While some pundits here celebrate the Australian dollar's parity with the greenback, others worry about the global currency wars.
The two are inter-related. The competitive devaluation among major economies such as the US, China and Japan cannot last forever. What happens if a the global overload of resources causes commodity prices to plummet or the central banks of other countries start to lift interest rates?
As Mr Richardson says, there are no certainties in currencies: "I may have to go back to even older methods of forecasting to get a better feel: sacrificing a goat and scattering its entrails. That works about as well as anything else."