SYDNEY (MarketWatch) — The U.S. dollar extended its gains early Thursday, with the advance sending the Australian currency below parity with the greenback for the first time since March.
The dollar index DXY +0.87% , which measures the U.S. currency against a trade-weighted basket of six other currencies, rose to 77.994, up from 77.089 in late North American trading on Wednesday.
The gains extended a rally for the U.S. currency on Wednesday, after the Federal Reserve said it would trade short-term bonds for long-term ones — the so-called “Operation Twist” — in an effort to support the U.S. economy, while also issuing a downbeat assessment of that economy. See report on Wednesday’s currency moves.
Fed shifts bond portfolio
The Federal Reserve says it will increase its share of longer-term Treasurys by $400 billion by June 2012 in an effort to make credit cheaper and spur spending and investment. “For the U.S. dollar, the key was that policy makers steered clear of a fresh wave of quantitative easing, thereby ensuring limited U.S. dollar damage,” said strategists at Credit Agricole.
Amid the moves, the Australian dollar AUDUSD -1.56% fell below parity with the greenback, although it was later edged back up to $1.0025 in the East Asian afternoon.
The Australian dollar is “a growth barometer and risk barometer, and it’s held up remarkably well over the last few months, but I think all of the bad news is starting to catch up with it,” said Su-Lin Ong, strategist at Royal Bank of Canada Capital Markets.
“There’s probably only so much it can withstand at the moment, and you have to admit that sentiment is pretty awful,“ she said.
The major currencies pairs likewise showed a rising U.S. dollar.
The euro EURUSD -0.73% fell to $1.3544, down from $1.3618 late Wednesday, while the British pound GBPUSD -0.42% traded at $1.5458, slipping from $1.5528.
Against the Japanese yen, the dollar USDJPY +0.06% rose to ¥76.74, from ¥76.66 in late Wednesday trading.
Source; http://www.marketwatch.com
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