Dollar hits parity with greenback ... before pulling back | News.com.au
THE Australian dollar reached parity with the US dollar for the first time since the currency was floated in December 1983.
The local currency rose to $U1.00 at 11.18pm (07.18 pm WIB (15/10)) last night in overseas trading.
It was the first time since 28 July 1982 that the Australia dollar has traded about one US dollar.
In afternoon London deals, the Aussie soared as high as $US1.0003, hitting its highest level since being floated 27 years ago. Moments later it pulled back to stand at 99.50 US cents.
Earlier yesterday, the local currency was hovering around 99 US cents ahead of the release of US CPI data, retail figures and a Federal Reserve speech that could indicate how much quantitative easing will take place.
Quantitative easing is a process whereby the US Federal Reserve increases the amount of US dollars in the economy by buying US Treasuries.
The Australian dollar touched a fresh 27-year high of 99.94 US cents overnight, the closest it has been to parity with the US dollar since it was floated in December 1983.
At 5pm on Friday the Australian dollar was trading at 99.28 US cents, down from Thursday's close of 99.61 cents.
Since 7am, the local unit traded between 98.92 US cents and 99.46 cents.
Nomura Australia economist Stephen Roberts said traders had been waiting patiently throughout the domestic session in the absence of any local data.
"It might be a bit of a patient wait for parity, but we will get there," Mr Roberts said.
He said the release of the US economic data and a speech by US Federal Reserve chairman Ben Bernanke would drive the momentum of the local currency.
"Those factors will certainly have some influence," Mr Roberts said.
Mr Bernanke said the central bank was ready to support recovery "if needed".
Speaking in Boston overnight, he gave his strongest hint to date that the US central bank will step in to help the country's fledgling economic recovery with more extraordinary measures to prime the economy.
During the offshore session last night, US retail sales for September are expected to have increased 0.5 per cent and the official measure of US inflation for September is expected to show a 0.2 per cent increase.
Mr Roberts said there could be an initial adverse reaction to the CPI data.
"But then probably we'll go back to the same groove over the next week or two," he said.
"Running towards the next FOMC (US Federal Open Markets Committee) meeting, people are still thinking there's a reasonable chance the Fed's going to start the next process of QE."
Mr Roberts said it was possible the Australian dollar would reach parity with the US dollar mid-way through the European session.
Treasurer Wayne Swan said the milestone reflected the stark difference in the strength of our economy relative to other nations, record prices for our commodities and the effects of diverse and dynamic international currency markets.
"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.
"The government has an agenda to strengthen and broaden our economy to increase economic capacity and competitiveness, including by cutting the corporate tax rate.
"We have a fiscal position which is the envy of the developed world, and any suggestion from the Liberal Party that it has anything to do with what we have seen today reinforces their complete lack of understanding of how the international economy works."
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