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Aussie dollar is biggest loser on employment data

London

THE Australian dollar was the big loser on Thursday after mixed employment data raised expectations for an interest rate cut, while investor nerves about suspected attacks on two oil tankers in the Gulf of Oman supported demand for the Japanese yen.

The yen also rallied on Thursday as fading hopes for a US-China trade deal at this month's G-20 meeting, as well as massive street protests in Hong Kong, drove investors into safe-haven assets, although stock markets in Europe managed to claw higher.

Reports of the attacks on two tankers, which sent crude oil prices soaring, added to the already-heightened tensions between Iran and the United States.

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The yen rose to as high as 108.16 yen per US dollar before settling at 108.44, up 0.1 per cent on the day.

"You still have a lot of uncertainty when it comes to geopolitics," said Manuel Oliveri, analyst at Credit Agricole.

"The focus is shifting to the G-20 meeting. Risk sentiment remains relatively unstable," he added, although cautioning that expectations for interest rate cuts by the US Federal Reserve were keeping investor confidence from weakening further.

The Australian dollar, viewed as a barometer for global investor sentiment, fell 0.3 per cent to US$0.6901, a two-week low. Against the yen the Aussie tumbled half a per cent to its weakest since January before hitting 74.89, down 0.4 per cent.

Mixed jobs data in Australia were taken as a green light for an early rate cut. Analysts noted that markets were pricing in a 65 per cent chance of a rate cut in July, and a more than 80 per cent chance of one by August and September. Australian government bond yields slid to record lows.

The US dollar edged lower, the index hitting 96.965 after softer-than-expected inflation numbers published on Wednesday. The greenback hit its lowest since late March on Monday as expectations grow that the Fed will soon cut rates.

The euro was little changed at US$1.1287.

"In our view, the Fed has blinked and rate cuts are coming from July. At the same time, the ECB (European Central Bank) lacks answers on what to do about the risk of a de-anchoring of inflation expectations. The Fed-ECB monetary policy divergence should pave the way for a higher EUR/USD over the coming six months," Danske Bank analysts said in a note. REUTERS