Dollar slips

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The Australian dollar slipped almost one US cent lower amid increasing speculation that the local currency may reach parity with its Kiwi counterpart.

At 0700 AEDT on Tuesday, the local currency was trading at 81.64 US cents, down from 82.52 cents on Monday.

It was trading at 104.99 NZ cents.

The Australian dollar surged against the greenback following the release of weak US wage growth figures on Friday night.

It got a further boost on Monday with an upbeat ANZ survey showing local job ads rose for the seventh month in a row in December.

But the currency did a U-turn overnight, amid increasing speculation that the Australian dollar/NZ dollar exchange rate could reach parity in 2015, BK Asset Management MD, Boris Schlossberg, said.

Expectations of a Reserve Bank of Australia rate cut were growing after a near 50 per cent drop in commodity prices, but in NZ, a housing boom had left its central bank contemplating further rate hikes, Schlossberg said.

“Whether the RBA decides to ease policy further remains to be seen, but this week’s employment report could be the key to setting market expectations for the near future,” Schlossberg said.

“The market is already expecting a sharp retrace to 5300 jobs from the 42,000 gain the month prior.

“However, if employment actually turns negative, the pressure on the RBA to act will increase exponentially and the Aussie dollar could crack the 80 US cent level as speculators exit the trade.”

AAP

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