Brighter US job outlook weighs on dollar
The dollar was buying US90.6¢ late on Friday after better-than-expected US jobs data triggered a surge in the greenback. It had been buying US91.83¢ in earlier trading.
A report showing the US jobs market had improved last month was taken as a sign the Federal Reserve could begin to rein in its stimulus spending sooner rather than later.
Wall Street closed stronger on Friday. The benchmark S&P500 closed up 1.02 per cent at 1631.89 despite the data sending US Treasury bond yields higher.
Wilson HTM Investment analyst Peter Esho predicted a flat open on Monday for the local exchange as investors wait for official monthly Australian employment numbers on Thursday. Total employment is expected to remain flat at about 11.7 million with the unemployment rate to rise to 5.6 per cent from 5.5 per cent.
If the numbers deteriorate, the Reserve Bank might lower interest rates next month, putting downward pressure on an already falling dollar, he said.
"I think the market will stay flat until Thursday's job numbers before we start seeing some volatility either upwards or downwards," Mr Esho said.
BK Asset Management managing director Kathy Lien said the US dollar was likely to continue its rally, as investors interpreted the jobs numbers as a sign the economy had improved to the point of no longer needing government support.
"Investors [on Friday] were looking for confirmation that the economy could handle a reduction in stimulus," she said.
"They also wanted evidence that the labour market is improving like the Fed predicts."
Ms Lien said investors were now anticipating an official cut to Fed spending sooner rather than later.
"There is only two real opportunities for them to do so this year - September and December. This is such a major monetary policy shift that Federal Reserve chairman Ben Bernanke will want to clarify the central bank's position and press conferences are scheduled after both of those meetings."
Frequently Asked Questions about this Article…
The article says the Australian dollar was set to fall below US90¢ this week after stronger-than-expected US jobs data pushed the US dollar higher. Investors interpreted the improved US jobs picture as a sign the Federal Reserve could rein in stimulus sooner, which supports the US dollar and puts downward pressure on the AUD.
Better-than-expected US jobs data triggered a surge in the US dollar and pushed US Treasury bond yields higher. Despite higher yields, Wall Street closed stronger on Friday, with the S&P 500 up about 1.02% at 1,631.89, according to the article.
The article notes the Australian dollar was buying about US90.6¢ late on Friday after earlier trading at US91.83¢, and it was expected to continue its fall to below US90¢ during the coming week.
Investors were waiting for the official monthly Australian employment numbers due on Thursday. The article reports expectations that total employment would remain around 11.7 million and the unemployment rate could rise to 5.6% from 5.5%. Market participants were predicted to keep the local exchange relatively flat until those job figures are released.
Yes. The article quotes Wilson HTM analyst Peter Esho saying that if Australian employment numbers deteriorate, the Reserve Bank might lower interest rates next month, which would likely put further downward pressure on the Australian dollar.
According to BK Asset Management’s Kathy Lien in the article, investors were increasingly expecting an official cut to Fed stimulus sooner rather than later. She noted there were two main opportunities for such a move that year — the September and December policy meetings — and that Fed chair Ben Bernanke would likely clarify the Fed’s position at press conferences following those meetings.
Peter Esho of Wilson HTM predicted a flat open for the local exchange on Monday as investors waited for the Australian jobs data, and he expected the market to stay flat until Thursday’s numbers before seeing potential volatility either up or down.
The article reports that US Treasury bond yields moved higher after the strong US jobs data while the benchmark S&P 500 still closed stronger, rising about 1.02% to 1,631.89 on Friday.
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