Aussie bounces on jobs data, rate cuts still on horizon


* Australia jobs +14,500, full-time +31,200

* But unemployment jumps to 29-month high of 5.4 pct

* Aussie dlr squeezed higher, euro extends pullback

(Updates prices) By Gyles Beckford and Wayne Cole

WELLINGTON/SYDNEY, Oct 11 (Reuters) - The Australian dollarmotored to a one-week high on Thursday as investors latched ontothe strong points in local jobs data, even as they did nothingto dampen the prospects of further rate cuts.

Australia added 14,500 jobs in September and full-timeemployment jumped 31,200, triggering an immediate bout ofshort-covering. However, the jobless rate also surprised byrising to 5.4 percent, a two year high, from 5.1 percent inAugust and above forecasts of 5.3 percent.

The market cued off the employment number and lifted theAussie to $1.0276, from an early $1.0223. Demand fromEuropean and U.S. names was now testing stops around $1.0280.

"The market likes the jobs data, which could be spun twoways: unemployment is up, which is no good; or there wasemployment growth. The market's running with the growth story atthe moment," said Westpac senior strategist Imre Speizer.

Still the jobs numbers did nothing to quell expectations ofa further interest rate cut by the Reserve Bank of Australia(RBA) before the end of the year.

"There's nothing in this report to stop the RBA from easingrates further next month, bringing the cash rate to 3 percent,"said TD Securities strategist Alvin Pontoh.

Interbank futures still imply a better than evenchance of a cut next month and are fully priced for a move byChristmas.

Earlier, the Aussie has been lifted by a further gain iniron-ore prices , which have risen nearly 13percent this week, and have clawed back around half the hugefall of July and August.

Aussie support going into the offshore session was seen ataround $1.0210, while stops at around $1.0280 were under test,and if breached then an assault on $1.0330 is possible.

The Aussie showed its strength with across-the board gainsagainst most majors, up 0.3 percent against the kiwi atNZ$1.2559 , the same size gain on the yen at 80.12 yen. The euro extended its pullback to four straightsessions, falling 0.5 percent to A$1.2515

Australian government bond futures were mixed with thethree-year contract turning around earlier gains to bedown 0.020 points at 97.610, while the 10-year contracttrimmed its gains to be 0.03 point higher at 97.045.


The New Zealand dollar spent much of the session ina tight range with a soft tone, managing to touch a high of$0.8183 from a low $0.8154.

"The kiwi's been pretty much contained, sideways movement,no real direction apparent, and it does look more vulnerable tofalling rather than rising later tonight," Speizer said.

Near term support for the kiwi is seen at $0.8150 and belowthat $0.8134, with $0.8210 the first hurdle higher.

The kiwi was feeling the weight of investor preference forthe Aussie, which after the jobs data hit a two-week high. Onlylast week the cross was languishing at a one year low ofNZ$1.2361.

It was unmoved by another crop of subdued local data, whichshowed manufacturing activity nudging higher in September butstill in contraction for a fourth consecutive month.

New Zealand consumer confidence dipped for a second month inOctober, although it was still solidly positive. The latestmeasure of food price added to a picture of benign inflationpressures, with prices down, all pointing to a steady rateoutlook into next year. See

New Zealand government bonds were mixed, withshorter yields 4 basis points higher, while longer dated paperclosed with a hint of a bid.

((Australia/New Zealand bureaux)(+61 2 9373 1800/+64 4 8027980))