The Australian dollar jumped on Thursday as local jobs data blew past all expectations and helped offset strength in its US counterpart, though there was still scant sign of the inflationary pressure that might push up interest rates. The New Zealand dollar got a slight tailwind from the Aussie and nudged up to $0.7256, having shed 0.7 percent on Wednesday to $0.7221 when the US dollar climbed.
The Australian dollar hopped higher to $0.8010, from an early $0.7973, recovering some of the losses suffered Wednesday when the US dollar rallied broadly. The bounce came after data showed employment leaped by 54,200 in August, far above forecasts of a 15,000 gain and the biggest rise since October 2015. Yet the jobless rate stayed at 5.6 percent as more people went looking for work, lifting the participation rate to its highest since 2012.
Indeed, with the labour force growing almost as fast as employment, that suggests there will be limited upside pressure on wages or inflation. New Zealand government bonds were under pressure following another session of selling in the US Treasury market. Yields were up 2 to 8 basis points along the curve. Australian government bond futures suffered likewise, with the three-year contract down 4.5 ticks at 97.925. The 10-year contract lost 5.25 ticks to 97.2775, while cash yields climbed to 2.738 percent.
As a result, interbank futures eased only modestly on the numbers to imply around a 30 percent chance of a hike in the Reserve Bank of Australia's (RBA) 1.5 percent cash rate in the next six months. "This is a stellar employment report, although considerable slack remains," said Su-Lin Ong, head of Australian strategy at RBC Capital Markets. "The global evidence suggests a much weaker link between employment growth/unemployment rate and wages growth/inflation than in the past," she added.
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