The Australian dollar rallied back above parity with the U.S. dollar and traded at its highest level since the currency was floated in 1983 on Thursday as the U.S. Federal Reserve outlined a second round of quantitative easing. Australian bonds on the short end of the curve were slightly lower.
Buying in riskier assets including the Australian dollar was robust as the Federal Reserve disclosed a US$600 billion asset-buying plan, known as quantitative easing, to inject life into an anemic U.S. economy. The Fed buying was even seen by some as a relief the central bank didn't pursue a more aggressive asset-buying plan.
For the Australian dollar, the Fed move immediately lifted the currency back above parity with the U.S. dollar for the first time this week, where it remained for much of the day. Even as local data on retail sales and the country's trade surplus came in below analysts' expectations, the data could do little to stunt the Australian dollar's ascent.
As the week points to a close, traders said even Friday's release of the Reserve Bank of Australia's November meeting minutes would be unlikely to make big waves with the currency. On Tuesday, the RBA surprised the market by raising its key cash rate 25 basis points to 4.75% after having been on hold for the past six months.
"Going forward this week, it's all about what happens with the U.S. dollar. And that goes for all crosses," said a Sydney-based trader.
At 0540 GMT, the Australian dollar traded at US$1.0049, up from US$0.9974 late Wednesday. Against the Japanese yen, the currency traded at Y81.205, up from Y80.455. Australian bonds drifted in a thin session Thursday with little to guide ahead of the all-important monthly U.S. payrolls report on Friday, said TD Securities Strategist Roland Randall.
"We're in a bit of a ghost period between the FOMC and payrolls," said Randall, who added flows in Asia showed no major buyers of note. In the interest rate futures market, the 3-year bond fell three ticks to 94.95, while the 10-year bond rose 2.5 ticks at 94.75.