WELLINGTON/SYDNEY: The Australian dollar bounced from five-month lows on Thursday as startlingly strong jobs data led markets to almost abandon any chance of further rate cuts, sending bond yields to their highest since June.
That was in contrast to the New Zealand dollar, which slumped to a seven-month low after the country's central bank signalled that it may raise interest rates by less and at a slower pace than initially expected.
The Australian dollar jumped half a cent to a high of $0.9218 after employment blew away expectations with a rise of 121,000 jobs in August, the largest number on record.
The unemployment rate fell back to 6.1 percent, from July's 6.4 percent and against forecasts of 6.3 percent. "The one key positive out of the super-strong result is that it should ease concerns about the labour market," said Savanth Sebastian, an economist at CommSec.
"The Reserve Bank would certainly be feeling a bit more comfortable.
Clearly, it has no need to be moving rates in any direction at present." Interbank futures now put the chance of an interest rate cut to a record low of 2.25 percent at less than 10 percent. Swap markets give 10 basis points worth of rate hikes on a 12-month horizon, from 6 basis points before the data. However, the Aussie met heavy resistance above 92 cents and was last at $0.9184, to show only a 0.3 percent rise on the day.
Technicals still looked bearish and dealers said a failure to break through major resistance around $0.9225/40 would indicate further losses.
The Aussie had tumbled more than 2 cents this week to its lowest since late March at $0.9113. Much of the pressure came from a broadly stronger US dollar and a pick-up in market volatility, which pushed investors into paring back hugely popular carry trades.
Still, the upbeat jobs report sent the Aussie closer to recent peaks against the yen and euro. It was last at 98 yen , having touched 98.83 on Monday, its highest in more than a year.
The euro shed half a cent to A$1.4047, to be just above the 14-month low of A$1.3854 set last week. Bond markets fell, with the three-year government bond future contract off 6 ticks at 97.140.
It briefly matched a five-month trough of 97.105. The 10-year contract shed 3.5 ticks to 96.405.
NOT SO FAST
The scene was quite different across the Tasman where the Reserve Bank of New Zealand kept its official interest rate on hold at 3.5 percent as expected, but signalled further increases might come at a slower pace.
The central bank fired another broadside against the kiwi's ongoing strength, which it called "unsustainable" and "unjustified".
The kiwi slumped around 35 pips to $0.8180, its weakest since February, before clawing back to around $0.8200. On a trade-weighted basis, it hit a six-month low of 78.35, pulling further away from a post-float high around 82.00 hit in July.
The kiwi plumbed one-week lows against the euro and sterling.
It eased to 87.45 yen, pulling away from a six-week high, and hit a session low around NZ$1.1185 versus the Australian dollar.
"They've done a reasonably good job in terms of getting the message out that there'll be fewer rate hikes and at the same time they've managed to keep the pressure on the currency with some pretty aggressive language," said Ben Jarman, an economist at JPMorgan.
The RBNZ said it would not comment on whether it had intervened to sell the domestic currency last month, as some had suspected.
Bids for the kiwi were seen around $0.8175, while chart support came in at $0.8150, roughly a base set in late 2013. Traders said a sustained break below $0.8200 would open the door to a test of $0.8050, the year's low.
New Zealand government bonds rallied after the announcement , pushing yields on the 2017 bonds 3.5 basis points lower.
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