Recently the price of the Australian dollar is moving inversely with the value of the U.S. dollar.

The Australian dollar reached a peak of US$0.9494 yesterday at midnight, which is more than a full cent higher than it was at the open of Australian trading time. The last time the Australian dollar performed so well was July 2008 when it hit US$0.9469.

Australia’s second largest lender Westpac Banking Corp.’s Robert Rennie claims, “The Australian dollar is very significant because it offers yields, high yields.”

Bloomberg reports that the Australian dollar is overvalued by 27 percent, as since June it has jumped from US$0.81 to US$0.95. So the value of the Australian dollar is worth more when converted into another currency and used outside of Australia.

Commsec chief economist Craig James says, “Both our iPod index and the Big Mac index are all suggesting, just like the Bloomberg study, that the Aussie dollar is overvalued.” Commsec is the broker-dealer of Commonwealth Bank of Australia, the country’s biggest lender.

According the Commsec iPod index, Apple iPods are currently priced the same as 2008, indicating the price to have appreciated in comparison to the U.S. dollar.

The CommSec iPod index measures the price of the media player on an international basis in terms of the Australian dollar, euro, Swiss franc, British pound, as well as the U.S. greenback.

Also it is more advantageous to buy an iPod Nano in 19 other countries than Australia, as opposed to only 14 countries six months ago.

Australian iPod pricing hasn’t changed in almost two years, despite a near 40 percent increase in the value of its currency, according to James.

“If the Aussie dollar remains firm and local prices don’t become cheaper, then more Aussies will be getting online to make their purchases or buy goods on holidays, putting pressure on local retailers,” James says.

Basically the CommSex iPod index is a modern parallel of the Big Mac hamburger index formulated by the Economist magazine, which has been running since 1986. The key principle underlying such benchmark indices is to measure the purchasing power parity between two currencies and a litmus test of which exchange rates are favorable for buying various goods in different countries.

The “lipstick index” is another reference from Leonard Lauder, of cosmetics giant Estee Lauder, whereby the sales of cosmetics could illustrate the health of economy. In other words, the theory behind this concept is that female consumers are likely to opt to purchase lipstick instead of more expensive items such as dresses and shoes when they have less purchasing power.

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