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Aussie dollar falls, bonds rally on poor jobs figures

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The Australian dollar shed more than half a US cent after official data showed the unemployment rate rose to a 10-month high in August.

The Australian Bureau of Statistics (ABS) reported on Thursday that Australia’s unemployment rate had climbed to 5.3 per cent in the month, up from an unrevised 5.1 per cent in July.

Total employment fell 9,700 to 11.433 million in the month.

The forecast was for total employment to have risen by 12,000 in August with unemployment falling to 5.0 per cent, according to the median of 13 economists surveyed by AAP.

The Australian dollar dropped to a low of 105.77 US cents after the figures were released at 1130 AEST, down from 106.39 cents in the moments before.

At 1200 AEST, the domestic unit was trading at 105.97 US cents, down from 106.06 US cents on Wednesday afternoon.

ICAP senior economist Adam Carr said the poor data showed the impact negative sentiment was having on the local economy.

“We’ve just come out of a period where earnings growth was solid and the domestic economy was growing rapidly,” Mr Carr said.

“At the same time, firms haven’t been employing – in fact, we’ve seen modest jobs shedding.

“This shows the danger of alarmism and hysteria on an otherwise healthy economy.”

He said the data would most likely not affect the Reserve Bank of Australia’s (RBA) outlook on interest rates.

“The fact that the underlying economy is so strong and earnings is strong and inflation is accelerating means that they would want the unemployment rate to get much higher (before they decrease the cash rate).”

There was no major economic data due out overnight, Mr Carr said.

Meanwhile, the Australian bond market rallied on the weaker than expected data.

At 1200 (AEST) on Thursday, the September 10-year bond futures contract was trading at 95.740 (implying a yield of 4.260 per cent), up from Wednesday’s 95.665 (4.335 per cent).

The September three-year bond futures contract was at 96.290 (3.740 per cent), up from 96.180 (3.820 per cent).

On Tuesday, the 10-year contract traded as high as 95.840 (4.160 per cent), which was the highest point for the latest contract since March 23, 2009.

UBS interest rate strategist Matthew Johnson said bond traders took the data as supporting the case for a cash rate cut from the RBA. This saw local bond prices rise in value.

He said the money market is pricing in, or betting on the RBA’s cash rate being cut by 67 basis points, or around two-thirds of one per cent, before the end of the year.