The U.S. currency now classified as a "low-yielding asset"

It pains me to write about the continuing fall in the US dollar as I am working here in the states and with the continuing decline in the US dollar my effective savings in Australian dollars is rapidly declining - make it even more expensive to move back home. Also it doesn't look like the US dollar is going to reverse the current trend anytime soon - so more gloom ahead.

I have written a number of times on the Australian/US dollar relationship, and this topic seems to be one of the most popular links into my site, so I guess I need to keep writing about it as that's what my audience likes. A recent reader poll I conducted resulted in an estimated range of $0.80c to $0.90c for the Aussie/US dollar exchange rate by mid year. However with recent moves and news, it looks like Aussie and US dollar parity is inevitable by mid-year. "Global investors are looking at the strong Australian economy, looking at that wonderfully high interest rate that they're picking up relative to the US and they're buying Aussie dollars - Parity's not out of the question", TD Securities global strategist Stephen Koukoulas said.

The US dollar was battered across the board, falling to a new record low of $1.51 against the euro after downbeat durable-goods data and hints from U.S. Federal Reserve Chairman Ben Bernanke that more interest rate cuts are on the way. Lower interest rates weigh on the dollar because they erode the return on dollar-denominated assets. "Today's record lows in the U.S. dollar, record highs in gold and record highs on oil mark a key tipping point in currency markets, as traders further downgrade the U.S. currency to a low-yielding asset," said Ashraf Laidi, chief foreign-exchange strategist at CMC Markets US, in a note.

The other big move is in gold prices, which are quoted in US dollars and provide a hedge against the US dollar decline. Gold futures rose sharply Wednesday, touching a record $970 an ounce.

"It seems investors are more concerned with the threat that inflation/recession poses, and with two of gold's key driving forces -- euro/dollar and oil -- now in uncharted territory themselves, it seems inevitable that gold will challenge new highs closer to $1,000 an ounce," said James Moore, an analyst at TheBullionDesk.com, in a research note.

So we are going to have the following very soon. $1:$1 Aussie/US dollar, $100+ oil & $1000 gold p/ounce. An unfortunate (for me anyway) symmetry in numbers!