The Aussie dollar briefly dipped below parity today before rising 0.47% to $1.0047 this afternoon.
AUD/USD initially fell below parity after German chancellor Angela Merkel said using the ECB as a lender of last resort and joint euro-area bonds are proposals that will not fix Europe’s debt problems. ‘I’m convinced that none of these approaches, if applied right now, would bring about a solution of this crisis,’ Ms Merkel said in a speech in Berlin yesterday. ‘If politicians believe the ECB can solve the problem of the euro’s weakness, then they’re trying to convince themselves of something that won’t happen.’
The Aussie dollar managed to pare losses, however, as markets speculated that the Federal Reserve may have to implement another round of QE to revive liquidity levels among US banks. Currency strategists at Westpac expect the Aussie dollar to decline toward the $0.93 to $0.95 region over the medium term, as they expect the Franco-German debate to linger.