Dollar gets boost

 

money, trading, dollarSurprisingly soft US wages growth figures have given the Australian dollar a boost above the 82 US cent level.

At 0700 AEDT on Monday, the local currency was trading at 82.07 US cents, up from 81.40 cents on Friday.

The US unemployment rate reached its lowest level in more than six years in December, falling to 5.6 per cent, official figures on Friday night showed.

But hourly earnings fell back, rising only 1.7 per cent from a year ago, just keeping up with inflation. That was significantly weaker than the 2.2 per cent growth expected.

The headline numbers of the report were strong but the soft wages growth attracted the most focus, Bank of New Zealand currency strategist, Raiko Shareef, said.

“The softer wages picture won the day, with bond yields and the US dollar closing significantly lower,” Shareef said.

“This outcome will fuel the debate on whether the US Federal Reserve will trust the usual relationship between (falling) unemployment and (rising) wages to eventually bear fruit, or sit on its hands until it sees some real wage pressures.

“We subscribe to the former view, and pick the first Fed Funds Rate hike in June.”

Shareef said the strong performance of the Australian dollar was surprising, given that metals prices fell on Friday night.

“Perhaps investors are beginning to unwind (at least in the short term) the extremely negative sentiment that has been priced into the Australian dollar since December,” Shareef said.

Coming up on Monday will be ANZ job ads figures along with official home loan data.

AAP

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