Australia dollar snaps 6-day rally on jobs blow, NZ dollar climbs

[SYDNEY] The Australian dollar came off a six-week high on Thursday after a surprisingly weak employment report showed a big slide in full-time jobs and added to the risk of a further cut in interest rates.

The Australian dollar snapped a six-day winning streak to trade at US$0.7689. It slipped 0.4 per cent after earlier rising to US$0.7735, its highest level since Sept 8.

Firms shed a huge 53,000 full-time jobs in September even though the unemployment rate stayed at a three-year trough of 5.6 per cent.

Just this week Reserve Bank of Australia (RBA) Governor Philip Lowe emphasised that rising under-employment and weak hours worked meant there was a lot more slack in the labour market than the unemployment rate on its own might suggest.

"Recently there have been more signs of a softening (in the labour market) than a strengthening," Paul Dales, chief economist at Capital Economics said.

"The labour market is edging closer to the 'deterioration' that RBA Governor Lowe hinted earlier this week (and) could prompt more rate cuts."

The Aussie weakened on other crosses as well, falling nearly 0.4 per cent each against the euro and the pound. It was off 0.3 per cent on the yen.

Against its New Zealand counterpart, it slipped 0.5 per cent after rising on Wednesday.

The Aussie has generally outperformed the kiwi dollar in recent weeks on growing expectations of a rate cut in New Zealand and as the RBA is seen staying pat in the near future.

The New Zealand dollar climbed to a more than two-week high of US$0.7265 after pushing higher overnight when the greenback gave up some ground.

The kiwi has been rallying since consumer price figures early in the week suggested inflation may have finally bottomed, albeit at very low levels.

While the Reserve Bank of New Zealand is still widely expected to cut rates at its Nov 10 policy meeting, economists are now much more sceptical about cuts after that.

The technical picture had also improved.

"The kiwi, if we remain at the current US$0.7230 level by the New York close, has broken out of the downtrend in place since mid-September and now looks positive for a run towards the US$0.7315 area," said OM Financial Ltd private client manager Stuart Ive.

New Zealand government bonds were a shade firmer, with yields down one basis point at most.

Australian government bond futures recouped early losses on the jobs report, leaving the three-year bond contract steady at 98.30. The 10-year contract was off one tick at 97.715.

REUTERS