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Australian Dollar Falls After Weak Jobs Data

Australian Dollar Falls After Weak Jobs Data
7/11/2012 11:27 PM ET

The Aussie declined sharply against other major currencies in Asian trading on Thursday after data showed an unexpected drop in Australian employment in June, adding to concerns about the economy's outlook and increasing chances for an interest rate cut by the central bank.

Data released by the Australian Bureau of Statistics showed that the economy lost 27,000 jobs in June after adding 38,900 jobs in May. Economists had expected employment to remain flat in June.

Meanwhile, the unemployment rate rose to 5.2 percent in June from 5.1 percent in May. The outcome was in line with expectations.

The report also showed that full-time employment decreased 33,500 to 8,065,500, while part-time employment increased 6,600 to 3,435,000. The participation rate came in at 65.2 percent, below forecasts for 65.4 percent and down from 65.5 percent a month earlier.

Australia's central bank on July 03 decided to keep the key interest rate unchanged at 3.5 percent as it awaits the pass through of the effects of the two consecutive rates cuts implemented this year aimed at shielding the economy from the worsening situation in Europe.

The central bank lowered its interest rate by 0.5 percent in May and 0.25 percent in June.

RBA governor Glenn Stevens noted that there has been a material easing in monetary policy over the past six months as a result of the sequence of earlier decisions. He said interest rates for borrowers have declined, to be a little below their medium-term averages.

The Australian dollar that ended Wednesday's New York session at 1.0253 against the U.S. dollar fell to 1.0184 in early Asian deals. On the downside, 1.016 is seen as the next target level for the Australian currency.

In reaction to today's jobs data, Westpac analysts said that the solid demand for the Aussie over the last couple of trading sessions had lulled the market into a false sense of security. The firm expects the Aussie to test further lower from here and sees support on the day for AUD/USD at 1.0175/80 and then at 1.0150.

Against the euro, the Australian dollar slipped to 1.2010 and this was down 0.6 percent from a fresh record high of 1.1939 hit in early afternoon New York deals on Wednesday. If the aussie weakens further, it may likely target the 1.205 level. At yesterday's close, the euro-aussie pair was quoted at 1.1941.

Continued uncertainty about the situation in Europe and disappointing minutes from the Federal Reserve also weighed on the Australian dollar today.

The minutes noted that the Fed is prepared to take further action if necessary, but it gave no hint that a third round of quantitative easing is imminent.

The Australian dollar declined to a 2-day low of 1.0403 against the Canadian dollar and the next downside target level for the aussie is seen at 1.038. The aussie-loonie pair ended yesterday's trading at 1.0455.

The Australian dollar edged down to as low as 81.08 against the Japanese yen from yesterday's close of 81.77. The near term support level for the aussie-yen pair is seen at 80.9.

Meanwhile, the Australian dollar that rose to near a 5-week high of 1.2914 against the New Zealand dollar at 7:20 pm ET dropped thereafter. The aussie-kiwi pair is currently trading near yesterday's close of 1.2857. If the pair falls further, 1.282 is seen as the next target level.

Looking ahead, the Bank of Japan is due to announce its interest rate decision shortly. The central bank is widely expected to retain its rate at 0.1 percent.

German wholesale price index for June, European Central Bank monthly report and the Eurozone industrial production for May are slated for release in the European session.

Across the Atlantic, Canada's new housing price index for May, U.S. export & import price indexes for June, weekly jobless claims report for the week ended July 7th and the Treasury Budget statement for June are expected in the New York session.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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