Interpac Business and Migration Solutions Melbourne Australia

(October 14, 2010)

THE Australian dollar was just short of parity with the US dollar today, rising to a post-float high above US99.70 cents.

By 1.10pm AEDT, the Australian dollar was trading at about US99.74c, its highest point since the currency was floated in 1983, and up more than one US cent from yesterday's local close of US98.46c.

Earlier today in New York, the Australian dollar had reached as high as US99.34 cents as gold, oil and other commodities rallied sharply. Australia's economy is dependent on the export of commodities and higher commodity prices provide strong support for its currency.

The New Zealand and Canadian dollars also took part in the rally in New York. The US dollar hit a five-month low at $C1.001 and threatens to return to parity with the Canadian dollar for the first time since April. The New Zealand dollar reached an 11-month high at US76.32c, according to CQG.

"It was a good day for risk," said Mike Moran, senior foreign exchange strategist at Standard Chartered Bank in New York.

"You are seeing a big push as we move toward November, with the mid-term (US) elections and (Group of 20 world leaders') meetings -- as well as the Federal Reserve –- capable of providing legitimate sources of uncertainty. They can still give quite a jolt."

While the spotlight fell on commodity-linked currencies, the euro stuck close to $US1.40, but had difficulty in remaining above that key level.

The common currency found support in the contrast between the likelihood of more quantitative easing in the US and the euro zone's readiness to end extraordinary support measures.

The minutes from the latest Federal Reserve policy meeting continued to cast a pall over the greenback. Fed decision-makers said it would be "appropriate to provide additional monetary policy accommodation" if unemployment remained too high or prices too low.

Investors now expect the Fed to announce further asset-purchase programs – quantitative easing -- to stimulate the sluggish US economy, perhaps at its next meeting on November 3.

Such measures hurt the US dollar because US interest rates will remain ultra-low for a longer period, steering investors toward higher-yielding currencies, such as the Australian dollar.

While the move toward more quantitative easing in the US had been anticipated in the weeks preceding the minutes of the September 21 Fed meeting, the declaration from a European Central Bank heavyweight to move away from stimulus measures has more firmly cemented an anti-US dollar and pro-euro bias, said analysts.

Better-than-expected industrial data from the euro zone and core machinery numbers from Japan yesterday added to the lift in risk sentiment.

（Source:theAustralian）