One after another, currencies are breaking through milestones.

[randomness]

From http://www.xe.com/news/detail.htm?articleId=13870:

Will the Australian Dollar Hit Parity?
John Kicklighter, Currency Analyst and Jamie Saettele, Technical Currency Strategist strategist@dailyfx.com
2008-05-21 19:08 UTC (GMT)

Who could have imagined that the value of one Australian dollar could be equal to one US Dollar? As recently as the beginning of this year, parity or an exchange rate of 1.0 still seemed like a far fetched idea because at the time, the Australian dollar was trading at 0.88 against the US dollar. Five months, 800 pips and 9 percent later, the AUD/USD is now within an arms reach of parity. Both the Canadian dollar and Swiss Franc have taken a stab at the same price level in the hopes of becoming more valuable than the US dollar, but only one of these currency pairs have been managed to be successful.

What is most impressive about the Australian dollar’s rally is the fact that it is coming at a time when the US Federal Reserve has reached the end of its monetary easing cycle. The AUD/USD pressed on to a new 24-year high above 0.96 thanks to rising commodity prices, a roaring economy and favorable yield differential. The big question now is if a move to parity is a done deal.

Comments

[meepodeekin.livejournal.com]

Question of the financially ignorant: Are all these currencies really breaking through milestones, or is ours just crashing through the floor and passing them on the way down?

[mizkit.livejournal.com]

It's partly that the USD is in something very much like free fall, but the euro is not only gaining ground against the USD, but also against the British pound (which makes the Brits, who are accustomed to cheap vacations in Europe, *very* unhappy), so it's some of both. I know less about the AUD, because I'm not living on USD in Australia, but I suspect from what's happening with the euro that it's a bit of both.

[r-ness.livejournal.com]

Yes. I.e., it's both.

Mostly, the U. S. dollar is dropping, but more against some than others. If your country's economy is strongly dependent on raw materials (Australia, Brazil, Canada), your currency is rising. If your country's central bank is keeping rates high (see above, plus the EU), your currency is again likely to rise.

On the other hand, if your country is artifically keeping the value of its currency more or less fixed to the U. S. dollar (China, Saudi Arabia, the United Arab Emirates), then other currencies are passing you on the way up, also.

One of the big issues is that there are some serious imbalances because of the way various countries are tying their currencies to the dollar, for both internal and external reasons, which--according to some people's thinking--is accentuating the swings in the currencies which are not tied to the dollar.

[meepodeekin.livejournal.com]

Thanks (to both r_ness and mizkit) for the explanation. Currency markets confuse me (probably because I never really pay them serious attention).

[skreeky]

This is because of our upcoming trip to Australia, you know. It *is* always about me.