Australia and NZ Dollars Plummet to Multi-Week Lows Amid Strong US Data

The Australian and New Zealand dollars tumbled to multi-week lows due to strong US economic data that boosted the greenback. The Australian dollar, in particular, fell to a seven-week low of $0.7025 after shedding 1% overnight.

A surprise rise in unemployment added to the Australian dollar's woes, turning its technical outlook bearish and risking a retreat to $0.6920 and $0.6866. The kiwi dollar also dropped by 1%, reaching $0.5676, which may test the June low at $0.5627.

The jobless rate in Australia rose to a five-year high of 4.6% despite a solid employment rebound of 39,500 jobs in August. This has some comfort for Reserve Bank of Australia Governor Michele Bullock, who believes unemployment between 4.5% and 5.0% is needed to loosen the labour market.

Oscar Guth, an economist for Oxford Economics Australia, noted that inflation pressures extend beyond the labour market, with oil above $100 a barrel and core inflation stuck at 3.6%. With unemployment still within Bullock's target range, markets imply a 95% chance of a 25 basis point rate hike to 4.60% next week.