Aussie dollar dips below US$0.65 after weak jobs data

Daily Currency Update

The Australian dollar (AUD) slipped lower on Thursday, with the AUD/USD exchange rate dropping by 0.40% to trade around 0.6485 at the time of writing. That puts the Aussie back below the key 0.6500 level — a psychological line many traders watch closely. The drop came after new data showed the Australian job market is slowing down more than expected, raising questions about where the economy — and interest rates — might be heading next. According to the Australian Bureau of Statistics (ABS), Australia’s unemployment rate rose to 4.5% in September. That’s up from 4.3% in August (revised from 4.2%) and is the highest unemployment rate we’ve seen since late 2021. Meanwhile, the number of new jobs created was also weaker than expected. The economy added just 14,900 jobs last month, falling short of the 17,000 economists had predicted. And to make matters worse, August's jobs data was revised to show a loss of 11,800 positions. Together, these numbers suggest the job market is starting to lose steam, and that could have knock-on effects across the economy. Slowing job growth and rising unemployment often point to a cooling economy. For the Reserve Bank of Australia (RBA), which sets interest rates, that could mean pressure to cut rates in the coming months to help support growth. So far, the RBA has kept rates steady at 4.10%, trying to strike a balance between fighting inflation and avoiding a recession. But if the job market continues to weaken and inflation eases further, rate cuts could be on the table in 2025. Lower interest rates typically make a currency less attractive to global investors, which could lead to further weakness in the Aussie dollar. At the same time, rate cuts can also support the local share market and reduce borrowing costs, a potential positive for mortgage holders and some sectors of the stock market. For currency traders and those with exposure to the U.S. dollar (including online shoppers and overseas travellers), the Aussie dollar’s dip below 0.6500 could be important. This level has acted as a key “support” area — a kind of floor for the currency. Now that it’s broken below, the next major support level is likely around 0.6450. If the Aussie continues to weaken, it could signal more downside in the short term. On the flip side, if the market gets a surprise from upcoming inflation or retail sales data, or if global risk sentiment improves, we could see a bounce back toward 0.6550.