Published: Wed, 11 Feb 2009 21:20:41 +0100

Aussie Dollar Could Drop on Weaker-than-Expected Employment Report

The Antipodean currency has experienced a choppy ride during the past week. A wave of risk aversion on Tuesday caused the Aussie dollar to drop two cents and give up most of its gains during the week.

Today the Aussie dollar has remained relatively range bound, hitting a session high of 0.6601 USD and a session low of 0.6483 USD. The Aussie dollar is up 0.23 cents to 0.6571.

Strategists are waiting for January's employment number, which they said could add to the weak outlook.

Richard Franulovich, senior currency strategist at Westpac, said the market appears to be prepared for a weaker employment number and that it could take a weak outlier to cause another sell-off.

"Jobs are being lost across the globe and I don't think Australia is going to be any different," he said.

With the global economy facing a growing recession, Franulovich said his strategy is to sell any strength in the Aussie dollar.

"The Aussie is over valued at 60 cents and I think it needs to be down near 50 cents," he said.

Tyson Wright, senior FX trader at Custom House, agreed that the Aussie dollar has room to fall as the RBA continues to cut rates. But he added that fair value is probably close to 0.60 USD rather than 0.50 USD.

He said a lot of bad news has already been priced in to the Australian economy and that employment data would probably have to show a decline of 40,000 jobs to cause another big sell-off. A weaker-than-expected employment report could cause the RBA to signal more aggressive rate cuts to help promote the economy.

"Even if it goes down to 50 cents I don't think it will stay there too long," he said.

Euro/USD down 0.13 cents to 1.2900

USD/CAD down 0.13 cents to 1.2425

USD/Yen up 0.07 points to 90.55

GBP/USD down 1.65 cents to 1.4378

AUD/USD up 0.36 cents to 0.6584

Euro/Yen down 0.11 points to 116.72

Euro/GBP up 0.92 pence to 0.8971

GBP/CAD down 2.20 cents to 1.7867

CAD/Yen up 0.07 points to 72.84

The U.S. Dollar Index is down 0.03 points to 85.78

All data taken at 3:15 a.m. EST.

By Neils Christensen, neilsc@economicnews.ca, edited by Sarah Sussman, ssussman@economicnews.ca

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