Aussie dollar keeps on climbing, maintains parity-plus levels with US counterpart

Wednesday, December 29, 2010

MELBOURNE - The Australian dollar has continued to rise over the hristmas break, maintaining parity-plus levels with its US counterpart and trading at a record against the European common currency.

The dollar was buying more than 101 US cents after hitting the 101.52-US-cent mark early this morning. It was worth 101.04 US cents about 1 p.m. eastern daylight time.

The $A has not dipped below 99 US cents for nine days now as it continues its post-float record run. It is well up on its lows for the year, struck in May when the Aussie dollar reached 81.58 US cents,” The Age reports.

The Aussie dollar, which reached 65.89 pence overnight, has also been trading at 25-year highs against the British pound for some time.

A number of factors are responsible for the rise of the Australian dollar in the past few months - worries over European sovereign debt; central bank intervention in the US economy; and high local interest rates, which feed demand for the local currency as investors seek out better returns compared to those available elsewhere in the world.

China’s central bank increased the interest rates by a quarter of a percentage point for the second time in three months on December 25, as the authorities ramped up efforts to curtail borrowing and tame inflation.

Mike Jones, the currency strategist of Bank of New Zealand, said commodity currencies like the Australian dollar have been strong over the past few days.We did have a surprise Chinese rate hike on Christmas day, that prompted a few jitters in markets and saw the Aussie dollar head lower initially. But overnight news out of China that it will restrict the export of some rare commodities has tended to be a boon for commodity currencies like the Canadian dollar and the Australian dollar,” said Jones from Wellington.

“That has prompted increase demand for commodity-linked currencies like the Australian dollar. The other thing to note is, as is normally the case at this time of year, volumes and liquidity are reasonably thin in markets so that does tend to exaggerate currency movements,” he added. (ANI)

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