$A at record highs, heads towards parity

The Australian dollar is heading towards parity after breaking through 99 US cents
and reaching record highs on Thursday afternoon.
The local unit reached an all time high of 99.00 US cents at 1843 AEDT, according to
IRESS data.
It is the highest point since the currency was floated on foreign exchange markets
in 1983.
The Australian dollar surged more than one and a half US cents after better than
expected employment numbers led to an increased chance of an interest rate rise in
November.
At 1700 AEDT, the Australian dollar was trading at 98.37 US cents, up from
Wednesday's close of 97.20 cents.
But after European markets opened, the local unit continued to climb higher.
Since 0700 AEDT, the local unit traded in a wide range between 97.59 US cents and
99.00 US cents, according to IRESS data.
Australia's unemployment rate was a seasonally adjusted 5.1 per cent in September,
compared with an unrevised 5.1 per cent in August, the Australian Bureau of
Statistics (ABS) said on Thursday.
Total employment rose by 49,500 to 11.324 million in the month, seasonally adjusted.
The local unit jumped 0.8 of a US cent on the release of the local employment report
at 1130 AEDT.
National Australia Bank head of research Peter Jolly said the better than expected
employment figures had put a November interest rate hike "back in play" for the
Reserve Bank of Australia (RBA).
"It seems that we are destined to have a crack at parity," Mr Jolly said.
"On Tuesday, the RBA surprised and the currency came off, and today we had a very
strong employment report for September and that has seen the market price back in a
much greater chance the RBA will hike in November".
The futures market has now priced in a 65 per cent chance of a rate hike in November.
At 1700 AEDT, the Australian dollar was at 81.49 Japanese yen, up from Wednesdays's
close of 80.84 yen, and at 70.65 euro cents, up from its previous close of 70.20.
The euro finished at 1.3922 US dollars, up from 1.3844 US dollars, and at 115.34
yen, up from 115.13.
The US dollar was at 82.84 Japanese yen, down from 83.18 yen.
The Australian bond market ended weaker as the chance of an interest rate hike next
month increased on the release of the stronger than expected local employment
figures.
At 1630 AEDT on Thursday on the Sydney Futures Exchange, the December 10-year bond
futures contract was at 94.925 (implying a yield of 5.075 per cent), down from
94.960 (4.040 per cent).
The December three-year bond futures contract was at 95.020 (4.980 per cent), down
from 95.150 (4.850 per cent).
RBC Capital Markets senior economist Su-Lin Ong said traders were now pricing in a
better than even chance of the RBA raising interest rates above the current level of
4.5 per cent at its next board meeting.
"There was a pretty sharp sell off in bond markets following that very strong
employment data," Ms Ong said.
She said the market ended about 17 points lower.
"The front end was leading the way, it was sharply flatter on the day.
"Markets moved pretty quickly to increase the odds of an interest rate hike in
November."
The 90-day bank bill closed at 4.810 per cent, up from Wednesday's close of 4.790,
while the 180-day bank bill rate was at 5.040, up from 4.990.
The trade weighted index from the RBA was 73.5, up from its previous close of 72.7.



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