Australian dollar hits parity, falls post-Bernanke
SAN FRANCISCO (MarketWatch) -- The Australian dollar briefly hit parity with the U.S. dollar in North American trading Thursday, tacking on gains in response to China's surprise move to cut interest rates.
Somewhat guarded testimony by Federal Reserve Chairman Ben Bernanke, however, caused the aussie to give up most gains by the close of the U.S. stock session.
The Australian dollar (AUDUSD) rose as high as $1.0002 shortly after U.S. stock trading started Thursday, rallying sharply after the People's Bank of China said it planned to lower benchmark one-year lending and deposit rates by 25 basis points, effective Friday. Read more on China rate move.
The announcement buoyed stocks and industrial commodities and sent the aussie up as much as 0.8% from 99.25 U.S. cents in late North American trading Wednesday.
"China's rate cut is a good sign for the aussie. It's a pretty aggressive move, which sends a strong signal that China is willing to support growth," said Chris Tevere, senior currency strategist at Forex.com.
By late Thursday, however, the Australian dollar was trading at a loss for the session, at 98.99 cents. U.S. stocks, after surging at the start, gave up most gains by the close. Oil and copper futures, which similarly received a boost after the China cut, closed the New York floor sessions lower.
Sapping some early enthusiasm, Bernanke -- the latest global central banker to address markets this week -- said he still forecasts U.S. growth to continue at a moderate pace. Analysts read his comments as suggesting the Fed may hold back on more monetary stimulus. Read more on Bernanke's testimony.
The question remains whether the unanticipated cut by China will have a lasting impact on the Australian dollar through the week. The aussie will likely regain parity, said Ashraf Laidi, chief global strategist at City Index Ltd., but is seen capped at $1.0180.
"For now, traders are reluctant to drag down commodity currencies ahead of possibly looming announcement to recapitalize Spanish banks and expectations that central banks will intervene via fresh asset purchases," he said.
Prior to today's gains, the Australian dollar had been getting a lift from domestic data. On Wednesday, the Australian government reported a jump in first-quarter gross domestic product. On Thursday, the government reported May employment in Australia also spiked.
Year to date, the aussie is down 3% against the U.S. dollar, reaching a high of $1.09 at February's end.