Feb. 13 (Bloomberg) -- The Australian dollar dropped by the most in almost a month after a report showed employers unexpectedly cut jobs and the unemployment rate climbed to the highest level since 2003.
The Aussie fell versus its 16 major peers as the data underlined concern the nation’s economy is struggling to transition from its dependence on mining-led growth as a record investment boom ends. Australia’s bonds rose, with the yield on the three-year note falling seven basis points to 2.98 percent. New Zealand’s currency also weakened as Asian stocks fell.
“The long-term prospects for the Australian economy still require a weaker or competitive currency to help with rebalancing,” said Patrick Bennett, a Hong Kong-based strategist at Canadian Imperial Bank of Commerce. “It shouldn’t be a surprise that employment remains weak, we already know that, the RBA has told us that,” he said referring to the Reserve Bank of Australia.
Australia’s dollar slid 1 percent to 89.39 U.S. cents as of 6:17 p.m. in Sydney after yesterday touching 90.67, the highest since Jan. 13. It dropped 1.5 percent to 91.20 yen.
Employers cut 3,700 jobs in January, compared with the median estimate for 15,000 additions, the statistics bureau said today. The unemployment rate rose to 6 percent from 5.8 percent the prior month, the data showed. The median forecast in a Bloomberg survey was for a gain to 5.9 percent.
The data follow a Chinese report yesterday that showed imports from Australia rose 12.8 percent, the biggest increase in six months, to a record. That data should support the Aussie, said Bennett, who recommended buying the currency around 89.40 cents as it may rally toward 92.
The Chinese government is targeting export growth of about 7.5 percent in 2014, three people with direct knowledge of the matter said, setting sights lower than last year’s pace.
Australia’s real exchange rate was probably overvalued by between 5 to 10 percent at the end of 2013, the International Monetary Fund said in a report. The Aussie traded at 89.17 cents on Dec. 31.
“With the exchange rate still moderately overvalued and weighing on non-mining activity, accommodative monetary policy remains appropriate,” IMF staff said in the report. “Higher resource exports will make the economy more sensitive to terms of trade shocks, and the floating exchange rate will be an essential buffer,” it said referring to the nation’s export earnings relative to import prices.
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