The Australian dollar has retreated from parity levels it reached in New York trade on Friday, to weaken slightly in the Asian trade market Monday.
The currency is expected o move little during the weeks, as traders wait on the minutes from the Reserve Bank of Australia's meeting in October, which are due to come out Tuesday. Traders will be looking to the issue of stable rates in a month where rates were plummeting around the globe, as well as to note what the RBA said about the currency strength.
"Our thoughts are that a higher Australian dollar is doing some of the heavy lifting for the RBA at present. If the Australian dollar sustains current levels, there is a good chance that it will prompt the RBA to revise down their inflation forecasts," a strategist from ANZ commented.
While the currency hit parity for the first time since it was floated more than two decades ago, reaching US$1.0003 in late trading on Friday in New York, there is speculation that more easing measures by the US Federal Reserve could see the local currency ease back to around US$0.9700 where it has been comfortably cruising for the past couple of months.
Australian Treasurer Wayne Swan has ignored the opposition’s call to artificially weaken the dollar, saying it was a “dangerous” practice, instead sticking with the government’s approach of taking no notice of the currency trade levels.
"The consequence of [lowering the Australian dollar] would of course be higher inflation and then higher interest rates, and with it a global collapse of confidence in the management of the Australian economy," the Treasurer said.
