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Money Changes: A$1 = US$1.003 …

  • October 15th, 2010
  • Posted by EUEditor

doillar-australian1.jpegThe Australian dollar has hit parity with the United States currency (15.10.10), for the first time since it was floated on money markets in 1982.

CROSSING THE PSYCHOLOGICAL BARRIER

The dollar was priced at $US 1.003 in New York, (for seven seconds!), later slipping back to $US 0.992 (xe.com, 15.10.10).

Analysts said strength of the Australian currency was “structural and cyclical”, its value linked to the strong demand for commodities exported from Australia, and pressure for higher interest rates (that pressure paradoxically reduced by the anti-inflationary effects of the high-set currency values).

Expectations that the Federal Reserve Board is preparing to increase money supply affected the US dollar especially; values against the Euro and British Pound, while markedly higher than two years ago (to the order of 16-50%), remained fairly stable this week:-  A$ = €0.705;  0.619.-pounds.

The Australian economy, and the dollar with it, survived the global financial crisis better than most, under the impact of stimulus programs and healthy export sales.

With assumptions that the high value trend would continue, a consumer watch got under way to see when, or whether cheaper import process would be passed on to retail customers, and exporters were bracing for lower A$ returns.

In the earlier years of the last Century, five-shillings, which became 50c, would be called a “dollar” (US); in the years of managed currencies Australian dollars at one time in the high-inflation 1970s could fetch as much as US$1.17 – levels never to be revisited after the 1982 float.

Since that 1982 initiative, the A$ has routinely been expected to fetch $US 0.75 over extended periods, and has seen sustained periods in the range of $US 0.55.

See dollar values, EUAustralia Online, “Economic Week..”, 14.9.10.

DIFFERENT MENTALITY – HOLDING DOWN THE YUAN

While money going “cheap” in low interest environments looks to places like Australia, and helps push up the currency value; an opposite story has continued with the managed, many say over-managed and steeply under-valued Chinese Yuan.

The European Commissioner for Economic and Monetary Affairs Commissioner, Olli Rehn, on the weekend (16.10.10) reiterated earlier demands for the Chinese authorities to yield to market pressure for the currency to rise.

“It’s essential that China allows renminbi (Yuan currency) to strengthen in relation to its all trading partners, including the European Union”, he said on radio.

He had earlier pointed out how advantages of a low set currency to Chinese exporters might prove counter-productive.

After talks with the Chinese Prime Minister, Wen Jiabao, at Brusels on  5.10.10, the Commissioner said appreciation of the Euro against other world currencies, including the Yuan, would adversely affect trade, by slowing economic recovery from recession, in Europe.

Reference

Alessandro Torello and Matthew Dalton (Dow Jones),   “2nd UPDATE:EU Rehn:Lack Of Yuan Appreciation May Hurt EU Recovery”, Wall Street Journal, NY, 5.10.10. http://online.wsj.com/article/BT-CO-20101005-703318.html, (16.10.10).

Reuters, London, “EU’s Rehn: essential China lets yuan strengthen”, 16.10.10.
http://www.reuters.com/article/idUSSGE69F01620101016, (16.10.10).

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