Australian Dollar Soaring High

The local currency hit its highest level since it touched 97.92 US cents on July 25, 2008, this morning (27/9/2010).

So the currency surge is a combination of:
* A crumbling US dollar that is a reflection of a poor American economy.
* Our higher interest rates attracting overseas money.
* Higher commodity prices.

Analysts say that if the currency gets above what's called a "resistance level" of US96.5, it could head higher towards parity with the greenback. Others say the Aussie dollar is overvalued by 25 per cent.

AUDUSD Record 99.94 cents!
Australia’s dollar traded near parity with the U.S. currency amid speculation the Federal Reserve will ease monetary policy further, boosting the yield advantage of the South Pacific nation’s assets.

The so-called Aussie was poised for a nine-week advance versus the greenback before a report next week forecast to show declines in U.S. housing starts. New Zealand’s dollar touched its strongest since July 2008 yesterday and Canada’s dollar reached parity for the first time since April as investors sought currencies of nations that offer higher interest rates.

“Whatever the reason, investors want to sell the dollar,” said Kazumasa Yamaoka, a chief strategist at investment advisory company GCI Research Institute Ltd. in Tokyo. “Most recently, strenuous expectations for additional easing are giving them an impetus to sell the greenback, and they spend the proceeds on higher-yielding currencies such as the Aussie which have yield advantage.”

Australia’s currency was at 99.39 U.S. cents at 9:15 a.m. in Sydney from 99.42 cents in New York yesterday, when it touched a record 99.94 cents. It has gained 0.9 percent this week. The Aussie was at 80.98 yen from 81 yen.

THE Australian dollar reached new post-float highs above $US1 today after the Federal Reserve's decision on a new stimulus plan.

The Australian dollar rose to $US1.0057, up from yesterday's domestic close of US99.68c. Analysts said the Australian dollar could easily hit $US1.01 if retail sales data to be released later today were strong.

The Fed’s $US600 billion plan to buy US Treasuries was larger than expected, Commonwealth Bank currency strategist Joseph Capurso said. "It's a bigger package than we thought; that means US dollar weakness," he said.

The Australian dollar was trading around record highs this morning due to US dollar weakness after a decision by the US Federal Reserve to stimulate the American economy.

The local unit reached 100.62 US cents in early trade, another post-float 28-year high. It was also buying 81.40 yen, 71.04 euro cents and 62.34 pence.

At 7am eastern-daylight time, the Australian dollar was trading at 100.35 US cents, up more than half a US cent from yesterday's close of 99.68 US cents.
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Half an hour later the local currency jumped above 100.50 US cents, according to IRESS data.

Since 5pm, the local unit traded in a wide range between 98.95 US cents and 100.38 cents due to volatility.

Westpac New Zealand senior market strategist Imre Speizer said there were volatile movements for the local currency immediately after the US Federal Reserve decided on another round of quantitative easing in early morning local trade.

Traders were still digesting the Fed statement on Thursday morning, Mr Speizer said.

"Immediately after the FOMC (announced its decision), the Fed went crazy in both directions," Mr Speizer said.

"It's only starting to settle now and show its colours and it's trading higher."

The US dollar slid on Wednesday, briefly touching a nine-month low against the euro, after the Federal Reserve said it would spend $US600 billion to buy US government bonds in an effort to boost the economy.

Investors had expected the Fed's action for months, since Ben Bernanke, the central bank's head, hinted at the move in a speech in late August.

Mr Speizer said some traders were profit-taking but the local currency moved up and down on "mad volatility".

"People read the statement and thought, 'Is this better?", or 'Is this a bit less?"'

"And possibly there was some profit-taking."

But the FOMC package was "broadly as expected," he said.

"The Aussie is slightly higher now than where it was 12 to 24 hours ago and the firm tone in the Aussie remains as the weak tone in the US also remains."

Mr Speizer said the weak US dollar theme would remain.

"And the theme is dollar weak, risk currencies strong."

He predicted the local currency would trade around the current record high levels during the domestic session.

"There is positive bias towards the Aussie," he said.

The local unit hit parity with the US dollar several times over the past three weeks.