The Australian dollar showed a mixed performance on Thursday after a weaker-than-expected domestic labor market report fueled expectations that the Reserve Bank of Australia (RBA) may cut interest rates sooner than previously anticipated. The currency slipped against the US dollar but held above its weekly low against a broadly weaker Japanese yen, as yen selling pressure and firmer risk appetite supported the AUD/JPY cross.
Australia’s employment data disappointed markets. According to the Australian Bureau of Statistics, the economy shed jobs, with reported figures varying: one market account cited a decline of 52,000 jobs, while another cited a loss of 4,000 in May, against forecasts of a 15,000 gain. The unemployment rate ticked higher to 4.1% or 4.2%, up from 4.0%, and the participation rate remained steady at 66.8%. The weak figures point to a cooling labor market that could ease wage pressures.
Following the data, money markets priced in a 70% chance of an RBA rate cut by September, up from around 50% before the release. The Australian dollar fell to a session low of $0.6630 against the US dollar before stabilizing near $0.6645, down about 0.3% on the day. Against the yen, however, the AUD remained supported because the Bank of Japan has maintained ultra-loose monetary policy, making the yen a preferred funding currency for carry trades.
Analysts noted that while the jobs report raises questions about the resilience of the Australian economy, the RBA’s focus remains on inflation, and the central bank may wait for sustained evidence of disinflation before easing. Global risk sentiment was also supportive, with Asian equity indices mostly higher and commodity prices, especially iron ore, remaining firm.
Traders will now watch upcoming Australian inflation data, RBA communications, and any shift in the Bank of Japan’s policy stance for further direction in AUD crosses.
