Parity pedantry

So sayeth the ABC: “Australian dollar verges on US parity

The Australian dollar is trading at a post-float high of 99.93 US cents.

Which is very exciting, but I think it’s worth remembering that breaking through 1-to-1 doesn’t actually mean anything in particular. It matters that the Australian dollar is rising in value, but any milestone is purely psychological.

Such psychology both intrigues and infuriates me. I’m going to be pedantic here, but surely it’s also pedantry to say that we’re not already at parity with the US dollar. We have been for several days. The difference between the two currencies now is well within normal intra-day fluctuations – effectively within the margin of error. Clearly psychology demands that the $AU rises above the $US in order for it to be called “parity”, but mathematically this is nonsense. If 99.93 US cents is not parity, then 100.07 cents is not parity either. (You could argue the last point on even more pedantic grounds, but… don’t.)

What will happen is this: the $AU will briefly, for an almost immeasurable stretch of time (a sort of economic Planck time), reach strict parity with the $US. It will then be higher that the $US, not at parity.