For the longest time, it seemed the Aussie dollar could do no wrong. It largely dodged the subprime fallout in America, which is more than most countries can say.

While America and many other nations’ fundamentals started eroding and heading south, Australia’s economy was still running strong, and its job market was tight.

In fact, Australia's only problem was a lack of an adequate supply of skilled labor to fill all of the available positions. This was all happening while America’s housing was in the tank and the unemployment rate was starting to head upward.

So Australia has been able to buck the trend of much of the rest of the world. It's been one of the few safe hideouts for money over the last year or so.

Australia's economy has been hitting on all cylinders for years, but now I can hear its engine start to sputter here and there.

The engines have been revved high for quite some time. Their consumer price index rose to 4.5 percent, which is far beyond the central bank’s 2 to 3 percent comfort level.

While inflation is still high, the economy is starting to slow as businesses and consumers cut back in their spending. The central bank believes this will cool off inflation and keep it from rising much higher in the near term.

That’s why their central bank is expected to keep interest rates unchanged this week at 7.25 percent (which is still a 12-year high). And if the jobless rate continues to edge higher, then you can feel sure they will keep their rates on hold in the near term.

Australia’s $1 trillion economy will continue to slow as gasoline prices rise and stock prices decline. This already has caused the consumer confidence levels to drop to the lowest level in 16 years.

The lack of consumer confidence is now starting to spill over into their retail sales numbers, which recently fell by the most in six years.

The latest Aussie retail sales numbers were for an expectation of a gain of 0.1 percent on a month-over-month basis. Instead, they were down 1 percent.

At the same time, June's consumer sentiment reading dropped 5.6 percent, down from the previous month's showing of positive2.7 percent.

Lending has also dropped to the lowest levels since 2002. Home loans, for example, previously decreased 4.2 percent, and the latest expectations were for them to drop an additional 2 percent. But it turned out they dropped 7.9 percent.

Expansion is slowing as well, as shown in the building approval numbers — previously they were up 5.4 percent, but the latest numbers show they were down 6.5 percent.

So the flow of money is slowing, and this will continue to slow the economy. This in turn will stop the tremendous rise of the Aussie dollar.

In fact, I think money will start to slowly flow out of the Australian dollar as more jobs are lost.

Just last month, Australia's largest airline — Qantas — eliminated 1,500 jobs.

Then there’s Starbucks. Yeah, we knew they were cutting jobs in the U.S. as they close over 600 stores. But now the company is going to close three-quarters of their 84 stores in Australia.

Back in February, Australia's jobless rate fell to a 34 year low of 3.9 percent. But just since last month, those numbers already have risen swiftly to 4.2 percent, and economists are expecting the jobless rate to rise to 4.3 percent this month.

Bottom line, the one-way bet in the Aussie dollar is now over. That's dramatically different from the situation of these last couple of years, when any currency investor could just buy any dip in the AUD/USD pair and come out smelling like a rose shortly thereafter.

Those days are behind us now. You won’t find me shorting this currency yet, but you won’t find me buying anymore at this time either.

However, after the U.S. elections in November and the Federal Reserve starts to incerase interest rates to combat the horrid inflation in America, the Aussie dollar will start its descent for sure.

I also think that after the U.S. starts to raise interest rates that Australia will finally have to start cutting its own interest rates. So this shrinking interest rate differential throughout 2009 will drive money out of the Aussie dollar rather quickly.

One thing to note about this currency is that it’s better to be out of it a bit early rather than a bit late. The reason being is because the sell-offs can be quite severe as the carry traders unwind their positions. These are big money investors who have been earning daily interest for years but now fear they may give it all back through the depreciation of the currency if they don’t exit quickly.

And that is what they will do —.exit very swiftly. This won’t likely happen tomorrow, but beware. The tables are starting to turn against Australia and back in favor of the beaten down buck as its interest rate hiking cycle is ahead of it while the interest rate hiking cycle is likely behind Australia.

This means that the U.S dollar in the coming months to year will have a more favorable outlook than will Australia’s dollar. This hasn’t been the case for many years now, and it will catch many currency investors by surprise.

You won’t get Australians to believe that the Aussie dollar is actually doing a reversal at that time. They will think it is just another one of its pull backs on the way up. Little do they know that the economy is slowly crumbling for now and therefore so will its dollar.

So don’t be one of the ones left chasing the Aussie dollar blindly.