Aussie and Canadian Dollars Big Winners

Last week’s big winners in currency markets were the Aussie and Canadian dollars. Many currency experts think both currencies will achieve parity with the US dollar in the very near future. The Aussie’s rise reflects the performance of the Australian economy which is commodity based and expanding despite the global recession. The US dollar has suffered downward pressure due to concerns about massive deficits and uncertainty about the future of the greenback as a reserve currency. Jonathan Xiong of Mellon Capital stated, “We like the Australian dollar and that’s one of the recovery plays we have on.” He also stated that parity is “a possibility, but we don’t make forecasts on whether it will go to parity or a particular rate.”

Chinese Demand

The Australian dollar is the second best performer in currency markets behind the South African rand. The Australian economy has been fueled by A$20 billion ($18 billion) giveaway to consumers and increased Chinese demand for iron ore which Australia has in abundance. The Aussie dollar hit 92.70 U.S. cents, the highest since August 2008. The Aussie dollar has gained more than 50% from a five year low of 60.09 on October 27th 2008.

Loonie 4th Best Performer Against US Dollar

The Canadian dollar which was also on track to achieve parity with the US dollar has suffered a slight setback due to rising risk aversion. The Canadian dollar fell as General Electric and Bank of America posted dismal figures triggering a decline in investor risk sentiment. The Canadian dollar, affectionately called the ‘loonie, fell 0.3% to 96.44 U.S. cents on Friday. Against the US dollar the loonie was the fourth best performer after the Australian dollar, the Brazilian real and the Mexican peso. Better than expected Canadian employment figures reduced unemployment figures to 8.4%. Many Canadian officials believe that parity with the US dollar could slow Canadian recovery.