Just as when the Asian crisis first blew up in June 1997 the dollar was dumped as a proxy for collapsing Asian currencies and slumping commodity prices, a whiff of world recovery has investors flocking.

"The A$ had everything bad priced into it last year," Citibank's forex head Steve Shuster said. "Now people are thinking the global economy and commodity prices have bottomed and Australia suddenly looks cheap."

The effect was electric with the dollar climbing over a cent in the last 24 hours to a nine-month high at 65 US cents. He reckoned the sea change in sentiment could see the currency to 67 cents in the medium term, where it would probably settle for a while given the speed of the ascent.

Some of those buying were believed to be hedge funds finally unwinding short positions taken last year when the dollar was in free fall to all time lows at $0.5530.

The name of financier extraordinaire George Soros kept creeping up, but he seems to be linked to every move in every market these days and dealers have long ago forgotten to be impressed.

"It's hard to sort the wheat from the chaff with such huge flows going through," said one head of forex here, noting that a single US investment bank bought at least A$750 million on Thursday night alone.

But there were also signs of genuine interest from more sober funds keen to increasing their portfolio weightings in Australian assets, he said.

"In part this is because Australia's economy has impressed as a safe haven recently and partly as the advent of the euro has reduced the options for investors," he said. European funds in particular needed to diversify their risk and many had weightings of almost nothing in the A$, so even a modest re-weighting amounted to large amounts of money.

The effect was clear in the dollar's meteoric ascent against the euro, reaching A$1.1736/54 per euro today from A$1.9300 when the new currency began trading on January 4, a rise of no less than 20 per cent.

The latest lunge higher had also breached some major technical levels and attracted the interest of momentum investors and "black box" funds, dealers said.

The former tend to buy into markets that are already rising in the hopes of making the ascent self-reinforcing, while the latter use computer programmes to automatically buy and sell on certain events.

One such event came late Thursday when the dollar surpassed November's rally peak of $0.6480 to reach territory not trodden since May.

This got chart watchers worked up as the currency was now within spitting distance of a major Fibonacci level at $0.6550, marking as it does a 38 per cent retracement of the entire decline from $0.8210 in December 1996 to last August's all-time trough of $0.5530.

Its capture would be a coup for bulls and could well signal the start of a major uptrend to $0.6870, a 50 per cent retracement, and the psychological 70 cent barrier.

The latter was also the target touted by influential US Investment bank Goldman Sachs earlier this week. Goldman's chief currency economist Jim O'Neill told a conference in New York that the A$ is short of fair value by around 20 per cent and could emerge as the top performing currency of 1999.

Few analysts here were as generous.

"That looks like a PPP valuation and the Aussie exhibits a huge divergence from that over time," said David de Garis, senior Treasury economist at ANZ Bank, referring to purchasing power parity.

"Our model is commodity driven and at present prices indicates the A$ is about four to five cents overvalued," he said.

Analysts also harbour suspicions about reports from the big US investment bank, which many see as simple marketing exercises or trading ploys--where the bank will go long of a currency before recommending it.