The relative strength of the Australian dollar against other currencies will not be bogged down by another round of interest rate increases. This was the assurance given central bank Deputy Governor Ric Battellino on Friday.

Mr. Battellino said it would be inappropriate to intervene in the currency markets and it is yet to be determined if the recent show of robustness in the price of the Aussie against other currencies is really absolute or just of the weakness of the others.

At the question and answer after his speech before the industry players of the property sector, the deputy governor reiterated that is the other way around: "The dollar is one of the things that affects the economy and through the impact it has on the economy, there will be an affect on interest rates."

He said although "the economy has to get used to a strong Australian dollar," inflation rates must be tempered from ballooning, thus another wave of rate increases is again in the horizon.

Mr. Battellino said as the RBA expects growth in Australia to pick up from its current rate of 3.25 percent to around 4 percent driven by domestic spending, inflation can hit the higher end of the bank forecasts at 3 percent by the first half of 2011.

He noted that the mining boom and an equally good economic data, the markets can expect an increase of 0.25 percentage point.

The bank did say in the accompanying statement, though, that it expected rates would have to be raised-a sentiment reiterated on Friday by RBA Deputy Governor.

He added that as most Asia-Pacific central banks are heading to further tightening of their fiscal and monetary policies, it is indicative of an emerging trend of a slow but steady economic recovery.

Downside of Aussie's strength

As sectors rejoice on the closing parity of the US and Aussie dollars, a statement from the chief executive of Chan&Naylor also warned of the implications of a stronger Aussie.

"The Australian dollar is the highest it has been since the floating of the dollar 27 years ago, which has consequences for the broader economy," said Sal Carrero, Chief Executive, Chan & Naylor.

Mr Carrero said the cost of imported consumer products will decrease due to the stronger buying power of the currency.

"Everything ranging from cars to electrical appliances to grocery items could experience price falls as a result of the dollar," Mr Carrero said.

Mr Carrero said the surging currency will also make it harder for Australian exporters as the cost of exported products becomes less competitive.

"The high dollar presents a real challenge for exporters in manufacturing, mining and agriculture," Mr Carrero said.

"It also has an impact on the tourism sector which is major source of export income for the country and regional economies. This will impact small to medium enterprises in regional economies.