Australian dollar falls following strong US jobs figures

The Australian dollar traded at a six-year low below US69c today amid concerns about world growth.

The Australian dollar traded at a fresh six-year low below US69 cents today as concerns about world growth and talk of recession in the local economy kept buyers on the sidelines.

At 4pm (AEST), the currency was trading at US69.29c, down from US69.78 late on Friday. It earlier traded briefly at US68.92, a low level not seen since the market panic associated with the global financial crisis.

Weakness in the Australian dollar also followed somewhat upbeat US employment data on Friday, which showed unemployment in the world’s largest economy falling to 5.1 per cent, its lowest level since the early months of 2008.

Economists said the outcome was strong enough to keep the US Federal Reserve on track to raise interest rates later this month, a move that would likely help the U.S. dollar strengthen.

The US unemployment rate is now below the 5.2 per cent to 5.3 per cent range that Fed officials thought it would be by the end of the year.

Richard Yetsenga, the head of global currency forecasting at ANZ Bank, said the Australian dollar was likely to continue to weaken.

“From our perspective we continue to expect the Fed to hike in September, although it is a close run thing despite payrolls on balance being robust enough. Even if delivered gently, a Fed hike on September 17 will be negative for the Australian dollar,” he said.

Matt Richardson, a currency trader at OzForex, said that with the Australian dollar now below US70c, the task of getting back above the psychological barrier will be substantial.

“It is becoming increasingly difficult to map a clear path of trajectory for the Australian dollar,” he said. “Having broken the psychological US70c barrier, support will likely become resistance with a push back through this threshold requiring a shift in sentiment,” he added.

The week ahead will bring tests for the Aussie dollar with three senior central bank figures scheduled to speak, including Deputy Governor of the Reserve Bank of Australia, Philip Lowe, in Melbourne on Wednesday.

Employment data for August on Thursday will also shape further views on whether the economy is weakening, or recent growth data understated activity in the economy.

Data last week showed the economy grew by a disappointing 0.2 per cent in the second quarter from the first quarter and by just 2.0 per cent from a year earlier.

Earlier today, data showed job advertising grew in August by 1.0 per cent, according to ANZ Bank.

The number of internet job ads grew 1.0 per cent in August after recording a fall of 0.6 per cent in July. They were 9.6 per cent higher compared to a year earlier. The number of newspaper job ads rose 0.8 per cent over the month, after recording an increase of 2.3 per cent in July.

ANZ chief economist Warren Hogan says “the bounce in job advertising is a good sign for now.” Still, GDP growth has slowed in Australia, suggesting that “employment growth is unlikely to pick up meaningfully in the near term,” he added.

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