UPDATE 1-Australian dollar hits parity with US dollar

(Updates with detail throughout)

NEW YORK, Oct 15 (BestGrowthStock) – The Australian dollar rose
above parity against its U.S. counterpart on Friday for the
first time since becoming a freely-traded currency, extending a
bull run that appears well-entrenched because of Australia’s
higher rates and robust, resource-driven growth.

The Australian dollar (AUD=D4: ) rose as high as $1.0004,
finally taking out the round-number, psychological level that
analysts and market players have been eyeing for months.

Expectations that the Federal Reserve is on the verge of
pumping more money into the U.S. economy in a process known as
quantitative easing has also buoyed the Australian currency.

Remarks from Fed Chairman Ben Bernanke on Friday gave it a
final push above the $1 parity level. [ID:nNLAFLE62N].

The Aussie has been the strongest major currency since
Australia skirted through the global financial crisis without
falling into recession.

In fact, its economy picked up steam, and the currency,
known at home as the “little battler” for the pounding it took
after it was freely floated in 1983, has surged 66 percent
since touching a low of $0.6007 in October 2008.

The currency retreated after rising above parity and was
last trading at $0.9920, and analysts warn trading will not be
a one-way bet, with the latest data showing speculators already
heavily long the Australian dollar. [IMM/FX]

But traders said the pull-back was mostly driven by
profit-taking, with support seen around $0.9908 and $0.9825,
which is on a short-term trend line.

Charts suggest the Aussie could rise as high as $1.0236 in
coming weeks, the 161.8 percent Fibonacci projection level of
the currency’s fall between November 2009 and May 2010.


Unlike other countries griping about excessive currency
strength against a sliding U.S. dollar, Australia’s central
bank has considered a stronger currency a natural outcome of
the country’s booming trade in natural resources and a tool for
fighting inflation.

Australia’s record trade boom could last for years, as the
country sells most of the commodities needed by rapidly
urbanizing China and India, including iron ore, coal, uranium,
gas, wheat and cotton.

About 60 percent of Australia’s sales abroad are commodity
exports, and top trading partner, China, sucks in about a fifth
of all total exports. Proximity to China and India has given
Australia a leg up over resource-rich Canada, which exports
primarily to the United States.

Surging demand from emerging Asia means Australia’s export
earnings from food, minerals and energy are expected to reach a
record A$215 billion in the year to June 2011, a jump of 26
percent from the previous year.

Head-turning profits have in turn led to an investment
binge. Analysts at JPMorgan estimate that total resource
projects underway, planned or under consideration, amount to
A$725 billion, or nearly 60 percent of Australia’s annual gross
domestic product.

That is fast-depleting spare capacity in the economy and
has put the Reserve Bank of Australia (RBA) on inflation watch.
And with low rates in developed countries driving capital into
faster-growing emerging economies, there’s little risk of the
RBA intervening to hold the currency down.


Australia trade/inflation chart:

ANALYSIS-Australia inflation riskier than debt [ID:nSGE68R00P]
ANALYSIS-Canada dlr rally could stall soon [ID:nN13265832]


The RBA has said rates need to rise from the present 4.5
percent, which is well above the Group of 7 rich nations
average of 0.55 percent. That increases its appeal over
lower-yielding currencies like the U.S. dollar.

The Fed has already driven U.S. rates to near zero and is
widely expected to pump more money into the economy in
November, pushing the greenback down further. A falling U.S.
dollar also drives up commodity prices, benefiting Australia.

Underscoring that, spreads between two- and 10-year
Australian and U.S. yields, which historically are highly
correlated to the Australian dollar, are near their widest in
more than two years. (0#AUBMK=: ) (0#USBMK=: )
(Reporting by Reuters bureaus worldwide; Editing by Padraic

UPDATE 1-Australian dollar hits parity with US dollar