Aussie Reaches Parity

[Chief V]

Aussie Reaches Parity

The Australian dollar has reached parity with the USD this morning, albeit briefly, as traders continue to sell USD and buy higher-yielding currencies. This is a level that has not been seen in well over 20 years, and caps off a 40 cent move by the currency since reaching its most recent lows a year ago. This has certainly made the Australian consumer happy as the relative size and remoteness of the country mean they have to import most of their goods. The psychological importance of this level cannot be ignored as everyone in Australia will know that they are at or near parity and rush out to buy USD. We saw much the same behaviour in Canada yesterday as we traded through par with the USD but have since retraced to where we were before the run at par. The Loonie has been lagging other major currencies of late and hasn’t taken the run at par with conviction. This could mean that the move has run out of steam and that the risks to USDCAD could be to the upside. Pending the market’s reaction to Bernanke’s speech today we could see some significant moves in the pair if there are any hints on their QE plans.

Have a great weekend.

By Brendan McGrath, Senior FX Trader,

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