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Dollar on the way back to parity

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Fears gripping global markets have seen the Australian dollar fall almost one US cent and could sink it below parity with its American counterpart in the next few days.

In late local trade, the currency was buying 100.77 US cents, after falling as low as 100.54 US cents today, down from down from 101.70 cents yesterday.

Westpac chief currency strategist Robert Rennie said renewed concerns over Europe’s austerity program in the wake of recent Greek and French elections had caused investors to move away from risk assets like the Australian dollar and towards ‘safe havens’ like bonds.

‘‘Equity markets are down, commodities are down, bonds are very much the safe haven and obviously the Australian dollar, amongst other currencies, continues to underperform,’’ he said.

He said a move below parity with the US dollar was likely in the next few days or weeks.

‘‘I think we’re going to head below parity for a period of time but I don’t think we will move far below that level.’’

In France, the presidential election victory of socialist Francois Hollande has been seen as a threat to the political consensus in the Europe Union which, so far, has prevented the crippling debt levels of member nations from spiralling into a global economic downturn.

Meanwhile, in Greece, voter discontentment at European Union imposed austerity measures saw the ruling coalition thrown out on the weekend but did not provide any party or coalition with enough seats to form a government.

Mr Rennie said the election result could see the country abandon its austerity program and threaten its place within the eurozone.

‘‘It is a very stark outlook that Greece faces and obviously any decision it takes to reduce ties with Europe would have significant implications.’’

He said traders would be closely watching developments in Europe over the coming days though the release of Australian labour force data on Thursday.

AAP’s survey of 15 economists on Wednesday revealed a median forecast for the unemployment rate to rise 0.1 per cent to 5.3 per cent in April.

AAP

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