The Australian dollar slipped on Thursday, retreating from one-year highs, after a surprisingly big fall in employment in August undermined market expectations for an interest-rate hike as early as next month.
The dollar, which hit a one-year peak of $US0.8669 offshore on Wednesday, fell to a low $US0.8579 after data showed 27,100 jobs were lost last month, more than double the number expected.
It closed locally at $US0.8596, with losses capped by a weaker US dollar and buoyant Asian stocks. Against the yen, it slipped to 79.17 yen, from Wednesday's close of 79.32.
The data cooled talk of rate rises even though unemployment was shown to be steady at 5.8 per cent, compared to forecasts for 5.9 per cent.
Some analysts said the stable jobless rate did not help the Aussie because the market was focused instead on a strong shift toward part-time jobs from full-time work, a trend that would crimp income and hurt key consumption in the long run.
Consumption accounts for about 60 per cent of the economy.
"On balance there is absolutely no justification for expectations of near-term tightening by the Reserve Bank Australia (RBA)," said Annette Beacher, economist at TD Securities.
Bill futures rallied as investors saw less chance for rates to rise from a record low of 3 per cent in October and November.
December bill futures climbed 0.14 points to 96.28, and the March contract added 0.15 points to 95.68.
Implied rates, based on money market and swap rates, cut the chance of an October rate hike to only 14 per cent from around 30 per cent before the jobs report. Even the prospect of a November hike dimmed to less than 50 per cent.
One-year swap rates fell to a low of 3.9925 per cent, well below a nine-month high of 4.31 hit August 31.
Expectations of less aggressive tightening by the RBA narrowed the yield premium on Australian two-year bonds over their US peers to 331 basis points, compared to a near 1-year high of 363 points on Monday.
Still, some analysts said it would be unwise to dismiss the chance of imminent tightening as data in coming months could show local demand holding up despite the fading effect of government stimulus.
"Realistically it is just too early to tell. Results are skewed and being hit by volatility, so don't buy into it," said Adam Carr, an analyst at ICAP.
Some investors seemed to agree, with interbank futures showing that investors are still sticking to bets for higher rates in December.