Australian dollar dips below parity with greenback - Channel News Asia

Australian dollar dips below parity with greenback
Posted: 14 May 2012 1206 hrs

SYDNEY: The Australian dollar dropped below parity with the greenback on Monday for the first time since December as political turmoil in Greece led traders to sell riskier assets.

At 1224 (0224 GMT), the "Aussie" was trading at 99.99 US cents, down from 100.14 cents at the start of Monday's trade, although it soon recovered to inch back above 100 cents.

The currency last dipped below parity with the US dollar in December after United States Federal Reserve left interest rates near zero, coupled with concerns about Greece.

Analysts said the latest drop was down to investors returning their money to safe-haven currencies amid fears Greece will exit the eurozone.

"This issue in Greece is really weighing on the market at the moment," Easy Forex senior currency dealer Francisco Solar said.

Emergency talks in Greece to form a coalition government are set to continue Monday in a bid to avert a repeat ballot after inconclusive elections a week ago.

"It's unprecedented, we really don't know what the implications of a country being ousted from a monetary union are," said Solar.

"So at the moment markets are pretty jittery."

Australia's commodities boom and relatively high interest rates over the past two years saw the Aussie soar past parity, hitting a record of 110.81 cents in July 2011.

It only retreated significantly after Japan's march 11 earthquake-tsunami and a downgrade of the United States' debt rating by Standard & Poor's.

Canberra has previously warned that the Aussie is likely to remain at a high level for years as it comes to be seen as a safe bet amid global turmoil.

But the strong dollar -- which first breached parity with the greenback in October 2010 -- is squeezing some local industries, with tourism, manufacturing and education exports particularly hard-hit.

- AFP/cc