WELLINGTON/SYDNEY: The Australia dollar tumbled on Thursday after a surprisingly weak jobs report cast doubt on market perceptions the Reserve Bank of Australia was done cutting rates.
The Australian dollar slipped more than half a cent to $0.9283, nearing a two-month trough of $0.9275 touched last week. Technicals suggest a break would target $0.9205/10.
The Aussie also lost around 0.8 percent against the euro, pound and yen.
Australian employment dipped 300 in July, while the jobless rate jumped to its highest in almost 12 years to 6.4 percent.
The bureau of statistics said the sharp move was partly due the rotation of its survey group with the new sample having a greater number of unemployed.
Debt futures rallied as the market priced in a greater chance the Reserve Bank of Australia (RBA) would have to cut interest rates again from record low rates of 2.5 percent.
Interbank futures show a one-in-three chance of an easing by December. It was a one-in-five chance before the data.
Yet, some dealers argued the jobs report is unlikely to bring rate cuts back to the table.
"It's certainly not as rosy as some had thought but one set of numbers won't change the RBA's neutral bias," said a trader at a European bank in Singapore, seeing the Aussie retreating to $0.9250.
Swap rates swung back to pricing an easing on a 12-month horizon, albeit of only 4 basis points. Australian government bond futures leapt, with the three-year bond contract up 9 ticks at 97.350.
The 10-year contract added 7 ticks to 96.560 in a bullish steepening of the curve.
Aussie weakness dragged the New Zealand dollar lower. The kiwi eased to $0.8463, after it had been buoyed by US dollar selling against the yen to reach a high of $0.8485.
"We remain wary of the downside risk in the NZ dollar, as falling dairy prices weigh on expectations for further RBNZ (Reserve Bank of NZ) rate hikes, and the NZ dollar," said ASB analysts in a market note.
Dairy is New Zealand's biggest export earner but prices have been tumbling in recent weeks. Near term support is seen at the previous session's low of $0.8423 and more substantially at $0.8400, while moves through $0.8500 are set to meet offers at $0.8530.
The Aussie fell close to 0.5 percent against the kiwi to NZ$1.0975, from recent eight-month highs. Local data showed a further slowing in New Zealand house prices, which would please the RBNZ.
A Reuters poll of the Antipodean currencies points to a gradual fall in the value of the kiwi, sitting around current levels for the next six months and only declining to $0.8200 over the coming year. New Zealand government bonds were largely flat.
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