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Dollar pushes back up

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The Australian dollar hit a new four-week high after the US posted a solid fall in its unemployment rate.

Early Monday, the local unit was trading at 89.55 US cents, up from 89.44 cents on Friday.

Early on Saturday morning, Australian time, the US non-farm payrolls report showed the US unemployment rate fell to 6.6 per cent in January, from 6.7 per cent in December.

Employment growth was 113,000, far fewer than the 175,000 the market was expecting but the participation rate rose.

After the report was released, the Australian dollar jumped to 89.99 US cents, its highest level since January 14.

Westpac New Zealand senior market strategist Imre Speizer said that while the US jobs report was not all good news it was a solid result and helped improve market sentiment.

“The Australian dollar bounced off 89.31 US cents pre-data and extended to 89.99 US cents post-data, but could not sustain the move,” he said.

“The US Federal Reserve’s 6.5 per cent unemployment rate threshold has pretty much been reached, though it means little: it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6.5 per cent.”

Speizer said the Reserve Bank of Australia’s announcement last week to keep the cash rate unchanged in the coming months should help support the Australian dollar in the weeks ahead.

“However, there remains a question mark around Australia’s ability to rebalance its economy which should be resolved later this year,” he said.

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