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Published: 11 years ago
 

Aussie dollar creeps towards parity


Aussie dollar creeps towards parity

Updated 1 hour 6 minutes ago
http://www.abc.net.au/news/stories/2010/10/07/3032335.htm



A US one dollar bill sits with Australian currency

The Australian dollar rallied on the employment data and has now hit its highest level in 27 years.

The Australian dollar is edging closer to being of equal value with the US dollar for the first time since its 1983 float.

It has traded above 99 US cents after today's surprisingly strong jobs figures smashed expectations.

John Noonan, senior foreign exchange analyst with Thomson Reuters, says the red-hot local economy, as well as speculative traders, are responsible for the surge.

He expects the currency to be on par with the US dollar soon.

"The calls for parity are going to be deafening now that we've broken through the 98.51 level," he said.

"Parity is just a psychological number, and as we saw with the Canadian dollar three years ago when that went through parity, it went another 15 per cent.

"That will create some real problems for the economy and headaches for the Reserve Bank."

He says the dollar is getting its strength from the widening gap between Australian and US interest rates.

"The US dollar is in a weakening trend and will be so as the Fed is preparing to stake quantitative easing at their November 2 meeting, so it's really a green light for dollar sellers to buy the Australian dollar."

Mr Noonan says the rise of the local currency will reduce inflationary pressures and may be considered at the Reserve Bank's next board meeting.

The Australian Bureau of Statistics (ABS) says almost 50,000 new jobs were created in September, well ahead of market forecasts.

The unemployment rate held steady at 5.1 per cent as the increase in jobs was offset by more people searching for work.

ICAP chief economist Adam Carr says signs of strength in the labour market increases pressure for a rate hike next month, but the Reserve Bank also has other factors to consider.

"You want to be sure inflation is a problem, you want to be sure that some other global uncertainties have died down before you hike unnecessarily," Mr Carr said.

 

 
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