Dollar dazzler flirting with parity

The soaring Australian dollar has briefly flirted with parity with the greenback before retreating late in European trading.

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The Australian dollar soared to 99.18 US cents at 1230 local time (2230 AEDT) – its highest point since the currency was floated in 1983 before retreating to 98.25 at 1625 (0225 AEDT Friday).

Adam Chester, a senior economist at Lloyds TSB, said commodity-related currencies such as Australia were enjoying a

strong run against the weakening US dollar.

“Our sense at the moment is that the Australian dollar has a fair wind behind it,” he said.

“The US dollar is clearly coming under a lot of pressure against all the major currencies at the moment because of concerns over the US and perceptions the Federal Reserve is going to undergo further stimulus.”

The Australian dollar surged after better than expected employment numbers on Thursday led to an increased chance of an interest rate rise in November.

Mr Chester said that parity would not prove to be a psychological barrier for traders despite the Australian dollar

having been the weaker currency since being deregulated under Bob Hawke’s Labor government.

“Parity in itself is not a massive barrier,” he said.

“Clearly a lot of precedents have been blown out of the water over the past three years in that regard.

“Sure there might be some short term resistance to a move beyond that.

“I think the environment we are in at the moment is conducive to break above parity if as we expected the US dollar continues to come under general weakness.”

Australia’s unemployment rate was a seasonally adjusted 5.1 per cent in September, the Australian Bureau of Statistics (ABS) said on Thursday.

Total employment rose by 49,500 to 11.324 million in the month, seasonally adjusted.

The local unit jumped 0.8 of a US cent on the release of the local employment report at 11:30 AEDT.