The long-awaited moment of "triple parity" seems imminent. The Swiss franc is already worth more than a greenback, and the Canadian dollar is seemingly poised to break through as well.
The surging "Aussie" - widely seen as a play on the China growth story and used by traders as a proxy for the Chinese yuan - captures the shift in the world's economic centre of gravity to the Pacific region. The currency was worth half a US dollar just nine years ago.
Australia's reserve bank said the "the economy is now subject to a large expansionary shock from the high terms of trade and has relatively modest amounts of spare capacity. The risk of inflation rising again over the medium term remains".
The move caught markets off guard. Credit growth has been cooling off over recent weeks and inflation is still just at 2.8pc - compared to 3.1pc in the UK - but the bank appears concerned about the risk of a wage spiral.
HSBC said emerging markets and commodity exporters such as Australia are opting for "quantitative tightening" to offset the liquidity effects of quantitative easing in the US, which is causing a flood of money into faster growing economies. Several states are toying with capital controls.
India's central bank has also tightened further, raising rates a quarter point to 6.25pc. It has imposed draconian housing curbs to reduce "excessive leveraging" and prick the bubble, limiting mortgages to 80pc of property values.
It may have responded with too little too late.
"Interest rates have been negative in real terms for 26 months, and heavily negative for several months," said Maya Bhandari from Lombard Street Research.
"Inflation is 9.8pc and is is going to get worse as the Fed's QE2 pushes up food prices, so a quarter point rate rise is not going to make much difference. They are relying on `administrative measures' instead of doing what they need to do," she said.
Ms Bhandari said the authorities had let rip with a "huge monetary and fiscal boost" before the elections in May 2009, leaving a legacy of overheating that is now coming back to haunt. The combined central and state budget deficit - including fuel subsidies - is nearly 11pc of GDP.
HSBC's currency team said the Australian dollar may be nearing its peak. "One concern relates to the deflating of the property bubble in China. This could happen gently but, if not, the Aussie will not avoid the fall-out. A sharp fall in Chinese property prices may very well lead to a deep examination of Australia's property bubble, and Australian banks," they wrote in a client note.
The report said Australia's lenders rely heavily on funding from abroad to finance the country's internal boom, creating a risky mismatch in liabilities. "Rationally or irrationally, this could turn very sour. The Aussie party looks set to come to an end soon," it said.
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