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Oct 18, 2010 9:55 ====The currency reached $1.0004 on Oct. 15,==45 days spring
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Date Posted: 17/10/10 18:42:10
Aussie-Dollar Parity March Set for `Failure' on Export Drag: Chart of Day
By Candice Zachariahs and Shani Raja - Oct 18, 2010 9:55 AM GMT+1100 Tweet LinkedIn Share
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Play VideoOct. 18 (Source: Bloomberg) -- Thomas Harr, head of foreign-exchange strategy at Standard Chartered Plc in Singapore, talks about the outlook for the Japanese yen and dollar. The dollar traded near the lowest level in more than 15 years against the yen amid lingering speculation further monetary easing by the Federal Reserve will debase the U.S. currency. Harr also discusses Asian currencies. He speaks with Susan Li on Bloomberg Television's "Up Front." (Source: Bloomberg)
The Australian dollar’s surge to parity with its U.S. counterpart may be short-lived, as the currency’s slide over the past year against Japan’s yen signals concern exporters will face lower margins.
“The real indicator in terms of pure Australian fundamentals is against the yen and not the dollar,” said Todd Gordon, a technical strategist and trader at GAIN Capital Holdings Inc. in New York. “The U.S. dollar weakness story, which is causing Australian dollar strength, is really putting a stress on Australia’s export markets, including commodity exports.”
The CHART OF THE DAY maps Australia’s exchange rate against the yen and U.S. dollar, and the performance of the S&P/ASX 200 Index stocks benchmark. The currency reached $1.0004 on Oct. 15, its strongest against the greenback since 1982, amid speculation Federal Reserve policy to boost the American economy will weaken the U.S. currency. The Aussie has fallen 3.5 percent this year against the yen. Australia’s key stock gauge slumped 3.7 percent in 2010, while the MSCI Asia Pacific Index gained 8.8 percent.
Exporters such as Billabong International Ltd., the world’s biggest publicly traded surfwear maker, and James Hardie Industries, the biggest seller of home siding in the U.S., have helped drag Australia’s main stocks index lower. Goldman Sachs & Partners Australia Pty said this month that growth in earnings per share for resources firms may drop to 30 percent from 48 percent, partly because a stronger currency cuts the value of overseas revenue. Australia is the world’s largest exporter of iron ore and coal.
The Aussie traded at 99.02 U.S. cents as of 8:41 a.m. in Sydney and has advanced 8.1 percent over 12 months. It bought 80.61 yen, a 3.2 percent drop over the past year.
The currency’s breach of parity with the greenback will prove “a failure” as the Federal Reserve is likely to disappoint market expectations for increased monetary stimulus, driving equities and other risky assets lower, Gordon said. That may drop the currency to below 94 U.S. cents, he said.
(To save a copy of the chart, click here.)
To contact the reporter on this story: Candice Zachariahs in Sydney at czachariahs2@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net;
To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.
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