Australia Markets closed

Dollar gets lift from strong jobs data

Wayne Cole
Wall Street and the rest of the world was shaken when US Treasury yields sank to record lows

The Australian dollar has struggled under the weight of worldwide economic anxiety even as domestic data showed jobs jumped past expectations in July and lessened the risk of a rate cut in the very near term.

The figures helped the Aussie edge up to $US0.6780, from an early low of $US0.6747, but left it short of Wednesday's $0.6809 high after a 0.7 per cent drop overnight.

The New Zealand dollar was sidelined at $US0.6439 after easing 0.3 per cent overnight to as low as $US0.6422.

Both currencies had been pressured by concerns the United states, and with it the rest of the world, was heading for recession as Treasury yields sank to record lows.

The yield on 30-year bonds broke under 2.0 per cent for the first time on Thursday and briefly traded beneath the three-month bill rate, an inversion that has foretold recessions in the past.

The Aussie won some respite when domestic data showed 41,100 new jobs were added in July, well above forecasts of 14,000, with full-time work up 34,500.

That was enough to make investors pare the probability of a rate cut from the Reserve Bank in September to 18 per cent, from 38 per cent earlier.

However, the data also showed unemployment held at 5.2 per cent in July as more people went looking for work, implying that wage growth and inflation would stay subdued.

Futures imply an 84 per cent chance of a quarter-point rate cut to 0.75 per cent in October, with November seen better than 100 per cent.

RBA deputy governor Guy Debelle also highlighted the risks from the trade war in a speech earlier on Thursday, warning it could trigger a self-fulfilling global downturn.

That outlook, coupled with the global rush to safe havens, kept Australian bonds well bid.

Yields on the 10-year note hit another historic low of 0.88 per cent, having dived a staggering 60 basis points in the past month.

New Zealand's 10-year bond yields dropped to a record trough of 1.033 per cent to be down 65bps from this time last month.