Australian dollar falls sharply after strong US jobs figures

The Australian dollar was punished on international markets overnight after stronger than expected American employment figures.

The local currency was worth US77.12 cents on Saturday as it continues to track close to its lowest point for six years.

The price of oil, gold and iron ore also fell after the release of the figures, which investors believe increases the chance of the US Federal Reserve raising interest rates later this year.

Such a move would strengthen the greenback and put further downward pressure on the Australian dollar and other assets.

Iron ore, Australia’s biggest export commodity, fell by $1.10 a tonne overnight and is now fetching just $58.20 a tonne – a fall of more than 50% in the past 12 months.

However, the falling Aussie dollar is likely to be welcomed by the Australian Reserve Bank governor Glenn Stevens, who believes the local currency has to fall to around US75c to make exports more competitive.

By forcing the Australian dollar lower, the strong US recovery could also slightly weaken the case for further rate cuts by the RBA.

Many market experts believe the RBA will cut again this year – possibly as early as its next meeting in early April – and bring the cash rate to a new record low of 2%.

The non-farm payrolls report, which caused the main Wall Street stock markets to fall as investors anticipated the end of cheap money, showed that the US economy added 295,000 jobs in February compared with an expected 240,000.

Over the past year the US has added an average of 270,000 jobs each month. Hiring from November through to February was the best four-month pace since the late 1990s.

Futures traders saw an improved chance the Fed would hike at its June meeting, though September remained more likely.

“This much stronger-than-expected number could push that date up,” said Tracie McMillion, North Carolina-based head of asset allocation at Wells Fargo Investment Institute.

Rick Rieder, chief investment officer of fundamental fixed income at BlackRock, said “all signs” now point to a rate rise June or September.