The Australian dollar touched its lowest level since early July, declining after domestic labor data led traders to scale back expectations of Reserve Bank of Australia interest rate hikes. The currency dropped as much as 1.1% to $0.6894 on Thursday, underperforming all Group of 10 peers against the US dollar. Higher unemployment and job losses signaled a softer labor market, reducing the likelihood of another rate increase.
Tim Baker, head of foreign-exchange research for the Americas at Deutsche Bank, noted the surprise rise in unemployment has been a clear drag on the Aussie, raising concerns the RBA has hiked enough and is slowing the economy. He added that the artificial-intelligence selloff has not helped, as the currency is sensitive to risk appetite. Stocks have slid as the AI trade unwound, prompting investors to seek safety in bonds.
Despite being one of the best-performing Group of 10 currencies versus the US dollar this year due to the RBA’s aggressive hiking cycle—including a September increase bringing the year’s total to one percentage point—the Aussie has weakened recently. Nomura strategists Dominic Bunning and Yusuke Miyairi ended a bullish Australian dollar vs. British pound trade after it hit a stop-loss level, citing stronger UK growth and weak Australian labor data. Hedge funds have trimmed bullish Aussie positions over the past three weeks but remain positive since December.
Maximillian Lin of CIBC said the data supports a November hold on rates, though a December hike remains possible given the volatility of jobs data.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing