- Australia’s Unemployment Improves Further; Falls to More Than 4-year Low
The number of unemployed people in Australia dropped to more than four-year low in October, the Australian Bureau of Statistics said on Thursday.
The seasonally-adjusted jobless rate for the month of October declined to 5.4 percent from 5.5 percent in September. This was the lowest unemployment rate since February 2013.
A disappointing net 3,700 jobs were created in October, coming in below economists’ projection of 17,500 jobs.
Breaking down the numbers, a total of 24,300 full-time jobs were created in October, reflecting the surge in full-time jobs when compared to the 20,700 part-time jobs created and also explained the reason monthly hours worked in October climbed by 0.3 percent.
Again, the participation rate, the number of people searching for work or working, dipped 0.1 percent to 65.1 percent. Meaning, the better than expected unemployment rate recorded was as a result of the low participation rate in the month of October.
Australia’s wage growth remained below expectation even with rising new job creation. Experts believe rising household debt and low earnings will continue to hurt consumer prices and impede the Reserve Bank of Australia from raising rates anytime soon. The reason retail sales were flat in September, even with 0.4 percent price cut.
According to Paul Dales of Capital Economics, the improvement in the unemployment rate is unlikely to drive wage growth.
“As yesterday’s release of the wage price index for the third quarter showed, this tightening in the labour market has not yet started to boost wage growth,” he said.
“And the lesson from overseas is that even if the unemployment rate falls further, wage growth still won’t rise much.”
The Australian dollar gained 0.07 percent after the report to trade at $75.9c against the US dollar. However, the pullback is nothing but temporary given the aforementioned reasons. As previously projected, as long as $76.21c holds we are bearish on AUDUSD for $75.05c.
CBN Warns Against Rejection of Old and Lower US Dollar Bills
The Central Bank of Nigeria (CBN) on Tuesday has warned both the Deposit Money Banks (DMBs), Bureau De Changes and other forex dealers against rejecting old and lower US dollar denominations.
In a circular dated April 9th, 2021 and signed by Ahmed B. Umar, Director, Currency Operations Department, CBN, the apex bank said it has received several complaints from members of the public on the rejection of old and low denominations of US Dollar bills by authorised forex dealers operating in the country.
The CBN, therefore, mandated all DMBs/authorised forex dealers to accept both old series and lower denominations of United States Dollars (USD) that are legal tender for deposit from their customers.
The leading bank added that it will not hesitate to sanction any DMB or other authorised dealers who refuse to accept old series and lower denominations of US dollar bills from their customers.
Also, the apex bank warned all authorised dealers to desist from defacing and stamping US Dollar Banknotes as such notes always fail authentication test during processing and sorting.
Naira Remains Under Pressure Amid Weak Macro Fundamentals
The Nigerian Naira plunged as low as N422 to a United States Dollar on the NAFEX window on Wednesday before moderating to N410 following a series of weak macroeconomic fundamentals released in recent weeks.
Nigeria’s inflation rate increased by 18.17 percent year-on-year in March while the unemployment rate rose to 33.33 percent with new job creation hovering at a record low amid weak economic productivity.
The commodity-backed currency traded at N486 to a US Dollar on the parallel market popularly known as the black market.
Against the British Pound, the local currency was exchanged at N670 and N577 to a Euro common currency.
At the Bureau De Change segment of the foreign exchange market, Naira traded at N482 per US Dollar; N670 per British Pound and N580 to a Euro.
In an effort to up revenue generation and ease exposure to the unstable global oil market, the Federal Government of Nigeria had removed electricity tariffs, fuel subsidy, introduced other import related charges and devalued the local currency more than three times in the last 12 months despite the negative impact of COVID-19 on the masses.
The series of adjustments dragged on economic productivity as importers and other forex-dependent businesses struggle with persistent dollar scarcity largely due to low foreign reserves of $35 billion caused by weak crude oil production and OPEC production cap.
The apex bank’s inability to service the economy with sufficient dollar to ease liquidity challenges in spite of various measures introduced recently to lure diaspora to remit more escalated prices of goods while the surge in electricity tariff, petrol price and other increments were passed on to already stressed customers.
Dollar Drops as Traders Prepare for Inflation Data
The dollar slipped on Monday towards a three-week low as Treasury yields traded near recent lows and traders awaited crucial U.S. inflation and retail sales data in coming days.
Elsewhere, it was a quiet start to a data-heavy week for foreign exchange markets. The euro climbed back above $1.19 while the British pound rebounded from a two-month low.
The dollar’s performance has been tied to U.S. Treasury yields for most of 2021, after concern about rising inflation in the United States and a stimulus-fueled economic rebound triggered a jump in Treasury yields in February.
A fall in U.S. yields last week triggered the worst week for the dollar in 2021. With yields inching lower on Monday, it was back under pressure.
Federal Reserve Chairman Jerome Powell said in a U.S. media interview released on Sunday that the U.S. economy was at “an inflection point” and looked set for a strong rebound in the coming months, but he also warned of risks stemming from a hasty re-opening.
Investors are now waiting for U.S. March inflation data due on Tuesday.
“We are set to see the first evidence of the much anticipated surge in inflation that is widely expected through the coming months as base effects from a year ago begin to take effect as the sharp declines post-COVID start to fall out of the annual calculations,” MUFG analysts said.
They said the dollar’s fortunes could well “remain linked to 10-year yields”.
The benchmark 10-year Treasury yield was at 1.664% after dropping to as low as 1.6170% last week. It had surged to a more than a one-year high of 1.7760% on March 30.
The dollar index, which measures the U.S. currency against a basket of currencies, weakened 0.2% to 92.03. The euro initially dropped but later recovered and was up 0.1% to $1.1915.
Bitcoin traded above $60,000, closing the gap to its record high.
Against the pound the dollar initially gained before reversing course. The British currency was last up 0.5% at $1.3763 after briefly touching a two-month low of $1.3669 as traders cheered the latest phase of the government’s economic re-opening plan.
The dollar fell 0.3% to 109.33 yen versus the Japanese currency.
U.S. dollar net short positions have fallen to their lowest in nearly three years, according to data published on Friday.
ING analysts noted that speculators had cut their net short dollar positions for the 12th consecutive week, which could prove a headwind for further dollar gains.
“At this stage, the dollar has lost all its positioning “advantage”, having a neutral speculative positioning, which suggests we should no longer see dollar rallies against most G10 currencies exacerbated by the unwinding of USD shorts,” they wrote.
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