Australian Dollar Tumbles Amid Labor Market Weakness
The Australian dollar declined against a basket of global currencies in the Asian market on Thursday, moving away from an 11-week high against its US counterpart.
This sell-off was triggered by data showing severe and unexpected weakness in the Australian labor market. The Australian Bureau of Statistics reported that employment unexpectedly fell by 15,800 jobs in July, far worse than market expectations for an increase of around 11,700.
The unemployment rate rose to 4.5%, above market expectations of 4.4% and up from 4.4% in June. This sharp decline in labor market data eased pressure on Reserve Bank of Australia policymakers, leading to a sharp decline in expectations for an Australian interest rate hike in September.
Market pricing for a 25-basis-point interest rate hike by the Reserve Bank of Australia in September fell from 50% to 15%. The Australian dollar could recover some of its gains if selling pressure on the US dollar persists, particularly amid the repercussions of the US Treasury's intervention in the bond market and the potential resulting decline in US Treasury yields.