The Australian dollar climbed above $0.71, reaching an eleven-week high and poised for a fourth straight weekly gain, as broad US dollar weakness outweighed signs of a cooling domestic labor market. The greenback stayed under pressure amid investor doubts that the US Treasury’s move to double purchases of longer-dated debt would deliver lasting support. That skepticism helped drive a rebound in US Treasury yields and heightened concerns over America’s widening fiscal deficit and heavy debt load.
The softer US currency more than offset the impact of weaker Australian labor data, which showed employment declining in June and the unemployment rate rising to 4.5%, its highest level in nearly five years. Even so, the figures were not seen as weak enough to fully erase expectations of further tightening by the Reserve Bank of Australia, with markets pricing in roughly a 70% probability of a rate increase to 4.60% by early next year. Meanwhile, a diplomatic deadlock in the Middle East continued to support elevated oil prices, keeping inflation risks in focus.
