Australian Dollar Falls

The Australian dollar fell from near the strongest in 18 years after a government report showed jobs growth in June was slower than expected, suggesting interest rates at a six-year high are keeping wage pressures in check.

Bonds rose after the report showed the unemployment rate unexpectedly gained. Reserve Bank of Australia Governor Glenn Stevens, who left the cost of borrowing at 6.25 percent for an eighth month in July, said in June he had ``time'' to watch whether wages and price pressures pick up.

``There was an initial bout of Australian dollar selling after the number,'' said John Horner, a currency strategist at Deutsche Bank AG in Sydney. ``At the margin, this number would support the RBA to stay on hold.''

The currency bought 86.15 U.S. cents at 1:08 p.m. in Sydney from 86.35 cents immediately before the report, after reaching 86.41 cents, the highest since February 1989.

The yield on the Australian government two-year bond declined to 6.39 percent from 6.43 percent before the report. Yields move inversely to prices.

Horner said the currency's fall was limited because the number was not that far off economists' estimates.

Employment rose 2,500 after a revised 43,300 increase in May, the Bureau of Statistics said in Sydney. The jobless rate rose to 4.3 percent. Economists surveyed by Bloomberg expected 15,000 new jobs and the unemployment rate to remain at 4.2 percent, a 33- year low.

`Sheepish in Selling'

Investors were reluctant to sell the local dollar after it rebounded so strongly from yesterday's decline, said Paul Milton, chief dealer at Societe Generale SA.

The Australian dollar snapped two days of losses versus the yen after a recovery in U.S. stocks prompted investors to return to higher-yielding assets.

The currency gained 12 percent this year versus the yen as traders were lured to so-called carry trades by Australia's higher interest rates. The benchmark rate is 5.25 percent in the U.S. and 0.5 percent in Japan. Investors were spooked yesterday after Moody's Investors Service lowered ratings on securities backed by U.S. subprime mortgages.

The employment report ``was definitely a weak number,'' Milton said in Sydney. ``The market might be a bit sheepish in selling the Aussie after the carry sell off and subsequent rebound,'' he said, referring to the currency by its nickname.

The currency gained 0.4 percent to 105.28 yen from 104.87 yesterday. It reached a 16-year high of 106.31 yen on July 9.

Australia's dollar fell the most in two weeks against the yen in Asia yesterday as a drop in U.S. stocks July 10 prompted investors to exit carry trades.

``Any dips in the carry trade are just seen as a buying opportunity,'' said Robert Rennie, chief currency strategist at Westpac Banking Corp. in Sydney. ``The market sounded an all clear today, which is supportive for the Australian dollar.''

source:bloomberg.com