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Aust dollar closes weaker on poor US jobs data

12 Jan 2009 5:32 PM

SYDNEY, Jan 12 AAP - The Australian dollar closed at its weakest level since New Year's Eve as the highest US jobless rate in 16 years sparked fears of a prolonged recession in the world's biggest economy.

At 1700 AEDT, the Australian dollar was trading at $US0.6938/42, down 1.4 US cents, or two per cent, from Friday's close of $US0.7078/84.

During the day, the local currency moved between a late afternoon low of $US0.6898 and an early high of $US0.7040.

The Australian dollar fell under $US0.6900 after 1500 AEDT as the highest US jobless rate since 1993 impaired the local share market's performance and demand for high-yielding currencies.

CMC Markets foreign exchange dealer Tim Waterer said the domestic currency continued to lose momentum late in the session as investors had a delayed reaction to the Friday night release of US non-farm payrolls data, showing 524,000 jobs were lost in December.

"It could have been minus 700,000 (jobs); 500,000 is bad enough but it could have been worse," he said.

The US Labour Department data showed a 7.2 per cent jobless rate in December, the highest level since January 1993.

The number of jobs lost in 2008 was the highest annual fall since 1945, the year World War II ended.

Both numbers added to investor concerns about a prolonged US recession, causing the Australian share market to fall by 1.5 per cent on Monday, following a weak lead from Wall Street on Friday night.

"There's going to be this feeling it could be a prolonged recession until we see a turnaround and we're not seeing that," Mr Waterer said.

The Australian dollar, already trading under $US0.7000, was dented in late morning trade after ANZ Banking Group data showed a seasonally-adjusted 9.7 per cent drop in newspaper and internet job ads during December.

This was the eighth consecutive monthly decline.

Financial markets are expecting official Australian labour force data for December, due out on Thursday, to show 20,000 job losses and a jump in the unemployment rate to 4.5 per cent, up from November's 4.4 per cent.

The Australian dollar reached a three-month high above $US0.7200 late last week, but Mr Waterer said the currency was more likely to trade between $US0.6900 and 0.7050 this week in the lead-up to the labour force data.

"The Aussie dollar had a good run last week but we're seeing a reality check today in the (US) jobs numbers," Mr Waterer said.

US equity markets and commodity prices were expected to drive the Australian dollar during the offshore session.

CURRENCY TABLE: Currency snapshot at 1700 AEDT


AUD/USD 0.6938-42 0.7078-84

AUD/JPY 62.53-60 64.50-57

AUD/EUR 0.5172-78 0.5178-87

AUD/NZD 1.1810-36 1.1933-58

AUD/GBP 0.4593-01 0.4656-65

EUR/USD 1.3409-12 1.3661-64

USD/JPY 90.12-15 91.14-18

EUR/JPY 120.87-90 124.52-56

(*Closes taken at 1700 AEDT Previous local session)

At 1600 AEDT, the Reserve Bank of Australia's trade weighted index was at 56.1, down from Friday's close of 57.2.