Currency Dollar reaches 27-year high against pound

Australian travellers to the UK will be cheering after the dollar hit a 27-year high against the pound.

The Australian dollar rose to 67.96 pence on Tuesday night AEDT - its highest level since 1985 - and hovered around that level on Wednesday.

The dollar-pound exchange rate has almost doubled in the past three years, a major bonus for Australians flying the kangaroo route to England.

For those Australians heading to London for the Olympic Games in July, they will be getting a lot more bang for their buck than in recent years.

The prices of hotel accommodation, enjoying a pint in a pub, shopping on London's famous Oxford Street and visiting the city's famous tourist attractions are all now much cheaper.

For about $A500 you can treat yourself to a night at the five-star Savoy hotel on The Strand, whereas three years ago, it would have set you back almost double that.

"Certainly from a travelling perspective, with the Aussie going considerably well, the UK would look very, very attractive, as would Europe," said HiFX trading director Mike Hollows.

The main reason behind the dollar's rise against the pound lies with the eurozone's economic woes and relative strength of the Australian economy.

In recent years foreign traders have increasingly preferred to convert their currencies to the Australian dollar, largely due to the relatively high official interest rates here.

The Reserve Bank's official cash rate is currently 4.25 per cent - the highest among developed economies.

That means overseas investors receive a higher return for their Australian dollar investments than they would, say, in the UK or US, where interest rates are close to zero per cent.

"Primarily you can argue that the Australian dollar's benefited considerably from the commodity boom we've seen since the middle of 2008," Mr Hollows said.

"The sterling, by virtue of its proximity and relationship with Europe, is clearly being pressured."

Easy Forex currency dealer Tony Darvall said British expatriates earning wages in Australian dollars have been one of the main beneficiaries of the high exchange rate.

However, he warns the honeymoon period for the Australian dollar may soon end, with stability expected to return to the eurozone.

"It is hard to see things improving and helping the Australian dollar to rally, without things improving in the eurozone," Mr Darvall said.

"The pound and the UK economy is basically at the bottom of their cycle and we're just rolling over to the top of ours."

Savings Australian travellers can reap with the dollar at a 27-year high against the British pound in January 2012 compared to October 2008:

HOLIDAY EXPENSEs.... NOW & THEN

* prices are approximate and rounded to the nearest Australian dollar