The Australian Dollar had its best week for several months, rising for four consecutive days then only finally giving ground to a resurgent US Dollar in the last few hours of trading in New York on Friday. After the very poor performance of the AUD over the previous few weeks and the general softness in many of the incoming economic indicators, there is no doubt that investors were either outright short of the currency or underweight relative to their neutral benchmark weightings. When the NZD began to squeeze sharply higher on Monday morning (see below) so it appeared that traders were also taking profits and closing out their Aussie positions too, for fear of a similar squeeze.
The NAB Business Survey on Tuesday was solid rather than spectacular but with most of the components of activity above their long-term averages, it proved enough to offer further support to the AUD ahead of Wednesday’s US FOMC meeting. It was a struggle to find anything particularly negative in the Fed Statement but the US Dollar nonetheless sold off sharply and AUD/USD got back on to a 76 cents big figure for the first time in a week; closing at 0.7635. Thursday brought the November labour market report. Consensus estimates were for a 19,000 increase in employment with the jobless rate steady at 5.4%.
According to the Australian Bureau of Statistics (ABS), employment actually jumped by 61,600 to 12.4 million in November. It was the largest monthly increase since October 2015, whilst the previous month’s figure of +3,700, was also revised up to show a gain of 7,800. Full-time employment jumped by 41,900 to 8.5 million, beating a 19,700 increase in part-time employment which rose to 3.9 million. Over the last 12 months, full-time employment has increased by 304,600, far outpacing a 78,700 increase in part-time employment. Combined, total employment increased by a huge 383,300. Reflecting the strong rise in employment, the total number of hours worked by all Australians increased by 9.8 million hours, or 0.6%, to 1.7409 billion hours.
AUD/USD jumped to 0.7668 immediately after the figures and then onto a high of 0.7689 on Friday; its best level since November 10th. As it seemed the US tax reform bill would be passed, US equities had a huge late session rally with the S+P 500 index up almost 1%. This dragged up the USD in its wake to leave the AUD at USD0.7641 at the New York close. Over the course of the whole week, the Australian Dollar was the second-best of all the major currencies we track here; just knocked off top spot by its trans-Tasman cousin.