News Service from House Harris

Aust dollar ends two US cents weaker

SYDNEY, Jan 15 AAP - The Australian dollar closed two US cents weaker at the lowest finish in five weeks, as a sharp fall in full-time jobs stirred worries about a recession.

At 1700 AEDT, the Australian dollar was trading at 66 US cents, a drop of three per cent from Wednesday's close of 68.01 US cents, marking the weakest local close since December 12.

The domestic currency fell to a daily low of 65.62 US cents soon after midday as traders reacted to official data showing 43,900 full-time jobs were shed in December.

In just one hour, the Australian dollar fell by one US cent from its daily high of 66.58 US cents.

Citigroup managing director of economics Stephen Halmarick said while the total job losses tally of 1,200 was far lower than market expectations of 20,000 retrenchments, the big fall in full-time jobs suggested the Australian economy was in for a recession.

"If people are moving on to part-time work, then everybody agrees that the trend is for the labour market to worsen," Mr Halmarick said.

"We would expect a recession this year and that will be seen with a further big rise in unemployment."

The Australian dollar plunged sharply during offshore trade as traders reacted to US Commerce Department data showing retail sales fell by a seasonally adjusted 2.7 per cent in December.

The result was much worse than market forecasts of a 1.7 per cent slump, and marked the sixth straight monthly decline.

Mr Halmarick said high-yielding currencies like the Australian and New Zealand dollars were dented, particularly against the low-yielding Japanese yen, as the retail numbers pointed to a prolonged US recession.

The Australian dollar was expected to struggle during Thursday night trade as markets priced in the European Central Bank cutting its key benchmark interest rate from 2.5 per cent.

At 1700 AEDT, the Australian dollar was at 58.67 Japanese yen, down 3.9 per cent from Wednesday's close of 61.07 yen, and at 50.09 euro cents, down from 51.15 euro cents.

The euro finished at 1.3176 US dollars, down from Wednesday's close of 1.3296 US dollars, and at 117.15 Japanese yen, down from 119.38 yen.

The US dollar was at 88.91 Japanese yen, down from 89.78 yen.

The Australian bond market closed stronger as a hefty plunge in US retail sales stirred worries about consumer spending in the world's biggest economy.

At 1630 AEDT, the yield on the Commonwealth Government March 2019 bond was at 3.845 per cent, down from Wednesday's close of 3.990 per cent, while the yield on the April 2012 bond was at 3.030 per cent, down from 3.160 per cent.

On the Sydney Futures Exchange, the March 10-year bond futures contract price was 96.140, up from Wednesday's close of 96.000, while the March three-year bond futures contract price was at 96.960, up from 96.845.

TD Securities chief economist Joshua Williamson said three-year bond futures contract prices, in particular, rallied early on Wednesday morning as the weak US retail sales data reminded investors the US economy was in recession.

The 90-day bank bill rate closed at 3.918 per cent, up from Wednesday's close of 3.903 per cent, while the 180-day bank bill rate was at 3.445 per cent, down from 3.550 per cent.

At 1600 AEDT, the Reserve Bank of Australia's trade weighted index was at 53.9, down from Wednesday's close of 54.9.