The AUD slid slightly in Asia trading Thursday, hit by a weak reading on the country’s labor force. The currency had gained for much of the U.S. session into early Asia action, helped by word from the International Monetary Fund that it is seeking more firepower to combat the euro-zone debt issues, as well as additional positive signs from some European debt sales and progress in Greek debt talks. But the positive sentiment was erased after the key monthly labor force report showed Australia’s economy lost 29,300 workers in December as a strong currency and growing economic concerns around the globe continue to hit the local economy, which has lost about 7,000 workers a month in the fourth quarter.
Even though the country’s unemployment rate held steady at 5.2% thanks to a slowdown in workforce participation, the fact that economists expected 6,000 workers to be added in the month hit the currency hard. Economists noted that the report increased the chances the Reserve Bank of Australia, or RBA, would cut its key cash rate 25 basis points for a third-straight meeting in February.
At 0520 GMT, the AUD was trading at US$1.0392, down from US$1.0402 late Wednesday. AUD/JPY changed hands at Y79.775, up from Y79.767. Still, the currency was kept from a broader sell-off, finding support and buyers just below US$1.0400 after having traded as high as US$1.0437 earlier in the day.
Moreover, not all economists and traders were sold that the labor report would tip the RBA’s hand, with bond prices ending the session only slightly higher and the interest-rate futures market only marginally moving its RBA rate cut expectations.
EasyForexNews Research Team