The Australian dollar eased further away from an 18-year high on Thursday after domestic data showed the jobless rate ticked up in June, trimming expectations that interest rates here would increase later this year.
But, with a broadly weaker US currency, the Aussie held support above $0.8600, a key psychological level, as investors thought the weaker-than-expected employment report did not signal a change in the trend of low unemployment and jobs growth.
The Aussie had risen as high as $0.8642 in early trade on Thursday, extending gains from offshore trade as demand for riskier bets, such as yen carry trades, returned after concerns waned over the troubled US subprime mortgage sector.
But it retreated as far as $0.8605 after headlines showed only 2,500 jobs were created in June, missing forecasts of 13,500 new jobs, and the jobless rate edged up off a 33-year low to 4.3 percent.
"Leading indicators of employment show employers are still looking to hire, so this is not a sign of a turnaround in the trend," ABN Amro chief economist Kieran Davies said. At 4 pm (0600 GMT) the Aussie was quoted at $0.8605/06, versus $0.8606/08 here late on Wednesday, Reuters data showed. In the past four months it has risen as much as 12.5 percent since the February-March bout of global risk aversion.
The Aussie/yen cross was quoted at 105.18/28 yen by late afternoon trade, up from its two-week low of 103.74 yen on Wednesday when investors reduced bets on borrowing the yen to invest in high-yielding currencies, known as carry trades.
It was still below Monday's 16-year high of 106.29 yen. The local currency drifted lower against the yen after the Bank of Japan, as expected, kept rates steady at 0.50 percent, the lowest among industrialised nations, and only one board member voted against the decision.