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If you blinked, you might have missed a landmark moment, or you might have just been sleeping.

The Australian dollar reached parity with the greenback for the first time since being floated in December 1983 at 11:18pm (AEDT) on Friday.

The currency breached the psychological barrier and hit $US1.004 during European trading just moments after a speech from US Federal Reserve chairman Ben Bernanke regarding further weakness in the US economy.

The unit had not traded at the $US1 mark since July 28, 1982.

But by 3:04am (AEDT) on Saturday it had retreated to $US98.84.

Federal Treasurer Wayne Swan said the milestone reflected the strength of the Australian economy.

"The government supports a floating currency, which has served our nation well as a shock absorber against global events for more than a quarter of a century," Mr Swan said.

"But we know that there are swings and roundabouts, and while the dollar has beneficial impacts for consumers through cheaper imports, it also makes life tougher for some sectors of our economy such as manufacturing and tourism."

David Bloom, HSBC's head of currency strategy in London, told Australians not to be happy with the situation.

He said the Australian dollar is "massively overvalued", and achieving par with the greenback is not something to "be celebrated".

"The market was determined that it reached parity," he said.

"I guess when you are a kid, you want to touch the ceiling and you spend all your time jumping and eventually you touch it and you walk away and it is game over.

"It wanted to touch parity and it touched parity.

"In the old world, a strong currency was a vote of confidence in your economy - in today's world of currency wars, a strong currency means you are losing the battle."

"Most countries want a weak currency. So we say be very careful and don't have a parity party - an overvalued exchange rate is nothing to celebrate."

While the high-flying dollar makes imports cheaper and overseas holiday much more affordable, it puts a massive strain on the tourism, farming and manufacturing sectors.

Sian Fenner, a global macro economist with Lloyds TSB in London, said the Australian dollar's big moment was a reflection of US problems at the moment.

"We still see this as being a US dollar weakness story, the uncertainty over QE (quantitative easing) or not QE," she said.

"Waiting for Bernanke to decide when and how much QE.

"Having said that, the Australian dollar does have some pretty strong support."

She said the British bank is predicting the Aussie to be around the 95 US cent mark by the end of the year.

Mr Bloom predicted the Australian unit would start heading south.

"According to the OECD, out of 16 currencies the Aussie dollar is the third most overvalued currency in the world," he said.

"Only the Swiss franc and the Norwegian currency are more overvalued so the point is that you might be worth more than the US dollar but you are more than 30 per cent above a fair value.

"... we would agree that the Aussie is massively overvalued."

"We have been very bullish about the Aussie but now we are quite sceptical and we think it is due a heavy retracement."

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