Jobs Data Give Aussie Dollar a Kick

Is the Aussie dollar going to knock again at parity’s door?

The Australian dollar got a boost Wednesday from strong Australian jobs data which was “a genuine surprise to all,” says Westpac Strategist Imre Speizer. The number was “positive all around,” Speizer added, and suggests Australia’s recent weak 3Q GDP figure will likely be corrected.

While most strategists still aren’t expecting movement until sometime next year, the data put increased pressure on the Reserve Bank of Australia to raise rates – a move that generally leads to a stronger currency.

That could give the Aussie dollar a lift against its U.S. counterpart. The Australian currency surged above the U.S. dollar but has given up some of those gains in recent weeks amid broader global economic concerns. The Aussie dollar was 0.9863 Wednesday versus 0.9790 before the data.

Of course, whether Australia’s truly on a path to greater-than-expected growth is open to question. Undeniably strong Australia November jobs report is likely to be the last robust number for some time, says UBS chief economist Scott Haslem. “At 3.7% year-on-year, the pace of jobs growth is far in excess of the pace implied by the NAB, ANZ or other forward looking indicators of the labor market. So this is likely the peak (or last hurrah) for such strong jobs prints.”

He notes the unemployment rate is little changed in seven months despite the strong job additions, with hours worked slowing.

Australia’s S&P/ASX 200 index was up 0.7% midday.

–Rebecca Howard and Geoffrey Rogow

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Aussie Dollar’s Era of Parity Beginning to Fade?

Fans of Aussie-U.S. dollar parity were dealt another blow today, as lower-than-expected Australian economic reduced chances of an interest-rate increase.

Third-quarter gross domestic product growth of 0.2% “confirms that the Australian economy lost momentum in the second half of this year,” said ANZ economist Katie Dean. Data show the economy responding to higher interest rates, with consumer spending starting to slow, she added, meaning the Reserve Bank of Australia “will be content with the current level of interest rates and won’t need to adjust policy settings for some time.”

She expects eased GDP growth to continue into the fourth quarter, possibly into early next year, before strong mining investment drives rebound in growth over the second half of 2011.
The lower-than-expected report comes as Australia’s central bankers grapple with fears of inflation, especially in housing.

All this is a negative for the Aussie dollar, as higher interest rates tend to push a nation’s currency higher. The currency was at US$0.9551 in early Asian trading Wednesday, from US$0.9588 late Tuesday.

For a brief, glorious period last month, the Aussie dollar matched and then exceeded the value of the U.S. dollar – bad news for a number of exporters and tourism, but good news for those who like to brag about all things Australia. But the currency—considered a speculative bet in investment circles–has been hit in recent days by a flight to safety by those worried about a spreading European contagion.

–Rebecca Howard

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