Beware the Aussie dollar bear In the dollar we trust ... a few cents here and there matters little to us. Nothing like currency action to get the speculation running, or sometimes the other way around. Along the way, a sense of perspective about our dollar's strength and position tends to get lost - or hidden by the odd hedge fund talking its own book. There are several threads to what the Aussie's been up to this week, ranging from conspiracy theories to Reserve Bank monetary motivations to plain wrong commentary. It was particularly funny to see George Soros' hedge fund and friends trying to talk the Aussie down, and seemingly getting away with it without question. Do you think a highly professional hedge fund would accidentally leak that it had made a billion-dollar bet against the Aussie? Probably not. Having made such a bet, the fund would have everything to gain by letting it be known. And if a fellow traveller chimes in with a prediction of the Aussie crashing, well, that's extra sauce. The thing about hedge fund heroes is that you hear plenty about their wins, but not so much about their losses, unless they send the fund broke. Remember the usual suspects who spent a couple of years trying to short Australian bank shares and were always ready to offer an opinion about an Australian bank or the housing bubble that was going to crash, breaking the earth open to spew forth toads and serpents and so? No, it certainly wasn't disinterested commentary - and it turned out to be expensively wrong for the shorts. But there's more happening with our dollar's dip against the greenback than the ambitions of a few foreign exchange gamblers and, as usual, much of the commentary about the Aussie gives the impression that it's all about us. Even the way the George Soros shorting story has tended to play, it's reported as a bet that the Aussie is falling. Well, only sort of. It would be more accurate to say that the action overnight wasn't the Australian dollar falling, but the US dollar rising. The greenback jumped against everything, especially the yen, as the herd continues to warm to the idea of the Fed maybe starting to ease off the quantitative easing later this year as a couple of employment-related statistics were positive. As that idea grows, and particularly if it becomes reality, the greenback should strengthen against all currencies. It will be a particular problem for the gold bugs, as the end of QE has the potential to pop the gold bubble quite spectacularly - so far, it's only been gently deflated a little. To the punter buying travellers cheques, it doesn't matter if the Aussie is falling or the greenback is rising, but it's an important difference from a macro economic view, as it involves confidence and isn't a straightforward indication of inflation implications. Again, some of the simplistic commentary this morning blandly asserted that a weaker Aussie/US exchange rate meant the cost of imported goods would rise. Well, not if they're imported from Japan, and not necessarily if they're from China, either. In the short term, movements in the Aussie and greenback can affect import prices, but it doesn't take long for the relationship between the trading countries' own currencies to dominate - all other pricing distortions being equal. Don't ask Apple. Meanwhile, the currency received plenty of credit as being the motivation for the Reserve Bank's interest rate cut this week. It seems the overwhelming opinion is that the dollar made them do it; that Governor Glenn "Biggles" Stevens is flying his RBA Spitfire off to join in the currency wars. I don't think it's that simple. As previously reported here, the RBA has spelt out that, at around present levels, it has eased monetary policy to soften the impact of the stubbornly strong Aussie, not to try to weaken it per se. While the RBA certainly is frustrated by our dollar's strength, my bet is that the key drivers for the decision to cut this week were an assessment of the impact of continuing fiscal contraction and a greater frustration that non-resources construction isn't improving; that our changed attitudes to leverage mean we're not rushing to borrow to build housing. Today's RBA quarterly statement on monetary policy further trims the central bank's expectation of public (government) demand. "Growth in public demand is expected to be subdued over the next two years or so, as fiscal consolidation at both the state and federal levels is assumed to continue," says the RBA. The outlook for public demand is a little softer than at the time of the February statement. And the February statement wasn't strong. The RBA certainly won't mind that the Aussie is down a bit against the greenback - whether it's from George Soros' minions talking their own book, or American economic enthusiasm, or shaved interest rates, or all of the above and more. But at around parity, the Aussie is still strong. A couple of cents either way matters much more to foreign exchange traders than to the rest of us.