Rising dollar could end manufacturing recovery

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The Australian dollar’s resurgence is threatening to put a stop to recovery in sectors such as manufacturing and tourism, according to some economists.

The drop from mining boom-time highs – it peaked at over $US 1.10 in 2011 – has brought relief to these industries. The easing has, for example, been cited repeatedly in the 13 straight months of 50-plus PMI results, which came to an end at the beginning of this month.

However, the dollar traded as high as $US 0.7675 last week, after being under $US 0.70 in March, and some economic advisers – such as BIS Shrapnel – have raised fears that this could slow economic growth, reports The Courier-Mail.

“The lower dollar has not only given a boost to service industries but manufacturing, which has had a tough 10 to 15 years,” Bank of Queensland economist Peter Munckton told The Courier-Mail.

“But the more the currency moves into the high US70¢, that competitive boost becomes tougher to achieve.”