The Australian dollar has hit an eight month high of $0.81c to the US dollar, with Westpac Bank economists claiming that we will have to wait till later today to see whether the Australian Reserve Bank cuts interest rates, a move that could affect currency movements.

Contributing to the rise is better-than-expected domestic manufacturing data and soaring commodity prices along with International confidence in Australia.

The big issue now is whether retail sales will hold up. Yesterday, the Australian National Retailers Association reported that retail sales rose 0.3 per cent in April, which is a positive sign for retailers and both Harvey Norman and JB Hi Fi have reported “good” sales on consumer electronic goods during May despite severe shortages of stock including HD TV’s, personal video recorders and home theatre kits.

In April, consumers spent $19.3 billion which is $56 million more than in March 2009 according to the ANR. It is also estimated that Federal Government handouts contributed over $600M to retail sales in April according to Westpac Bank.

A Harvey Norman franchisee said “Sales are looking good at the moment. Even bedding and selected appliances are starting to move. Depending on where the dollars goes we may see some vendors cut prices, but I doubt this as many are under pressure from overseas subsidiaries to deliver profits. I also doubt whether many retailers would pass price cuts on right now if they got them from vendors”.