The return of risk appetite has driven the Australian and Canadian dollars to fresh multi-decade highs. For the past few weeks, the Australian dollar has been making new 18 year highs, but today, the currency took out its 23 year high.
This one way trend has now lasted for almost two months and even though many traders may think it is premature, it could be time to start talking about whether the Australian dollar will hit parity with the US dollar. It is hard to believe that the Australian dollar is as far being even with the US dollar as the Canadian dollar was just six months ago. With the housing market in Australia still strong, the central bank could continue to raise interest rates. Next week?s Australian employment numbers will help to confirm or deny that. The Canadian economy is also performing very well. In September, employment jumped by 51k, which is the biggest rise in six months. This drove the unemployment rate down to 5.9 percent, a 33 year low. Given that the market was looking for only the jobless rate to rise and only 15k jobs to be added by Canadian firms, this number completely blew away expectations, causing the Canadian dollar to rise to a 31 year high. Like in Australia, another rate hike by the Bank of Canada is still on the table. The only meaningful economic data from Canada next week is the trade balance. Although there was no economic data from New Zealand overnight, the currency also rallied on general optimism towards high yielding currencies. New Zealand retail sales are the only piece of data due out next week.
[B]Written by Kathy Lien, Chief Currency Strategist for DailyFX.com[/B]