Oct. 15 (Bloomberg) -- The Australian dollar may breach parity with the U.S. currency next year as the nation’s interest rate premium widens with the central bank increasing rates amid accelerating economic growth, St. George Bank Ltd. said.

“We do not rule out the Australian dollar breaching parity,” Besa Deda, chief economist at St. George Bank, wrote in a note to clients today. “Interest-rate expectations are an increasingly dominant driver of the Aussie dollar.”

The Australian dollar will climb to 96 U.S. cents by year- end and peak at 99 cents in the second quarter of 2010, Deda wrote. Australia’s currency rose 0.8 percent to 92.23 U.S. cents as of 5:02 p.m. in Sydney.

To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

Last Updated: October 15, 2009 02:12 EDT