Australian dollar stung as jobs blow slashes chance of rate rise

The Australian dollar fell 0.4 per cent to $0.6945 on Thursday, according to Business Recorder, after a weaker than expected employment figure for September led traders to scale back bets on further rate increases. Employment dropped by 39,300 in September, its steepest fall since early last year, against analyst forecasts of a 20,000 gain. The jobless rate held at a five-year high of 4.7 per cent, while the August figure was revised up from 4.6 per cent.

Markets cut the probability of a November rate hike to around 9 per cent from 32 per cent, and a December increase to 28 per cent from 56 per cent. Australian three-year bond futures rose 11 basis points to 95.190 on the data. The RBA has lifted rates by 100 basis points this year to 4.6 per cent and had kept the option of further tightening open.

Abhijit Surya of Capital Economics said the weaker labour market should reassure the central bank that its policy is restrictive enough. He expects the jobs market to loosen further as earlier tightening takes full effect. Across the Tasman, the New Zealand dollar held near $0.5609 after reaching a 17-month low of $0.5566 overnight.