Aussie Hits Parity with Loonie as Rate Outlook Diverges

The Australian dollar has reached parity with its Canadian counterpart for the first time in over eight years due to diverging rate outlooks. The Aussie traded at C$1.0004 on Wednesday after climbing 0.2% overnight to hit an 8-1/2-year high of C$1.0012.

The Reserve Bank of Australia's rate outlook is driving the Australian dollar's strength, with a fourth hike this year to 4.6% on September 29 all but locked in. The question remains whether the RBA will keep the door open for another move in November.

In contrast, the Bank of Canada has lagged behind the global tightening cycle, having held rates steady at 2.25% for nearly a year as inflation remained subdued and a trade war with the US clouded the economic outlook. The Bank of Canada's rate hike is not expected to be delivered.