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 dollar motored to a one-week high on Thursday as investors latched onto the strong points in local jobs data, even as they did nothing to dampen the prospects of further rate cuts.

Australia added 14,500 jobs in September and full-time employment jumped 31,200, triggering an immediate bout of short-covering. However, the jobless rate also surprised by rising to 5.4 percent, a two year high, from 5.1 percent in August and above forecasts of 5.3 percent.

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

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

Still the jobs numbers did nothing to quell expectations of a 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 easing rates further next month, bringing the cash rate to 3 percent," said TD Securities strategist Alvin Pontoh.

Interbank futures still imply a better than even chance of a cut next month and are fully priced for a move by Christmas.

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

Aussie support going into the offshore session was seen at around $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 gains against most majors, up 0.3 percent against the kiwi at NZ$1.2559 , the same size gain on the yen at 80.12 yen . The euro extended its pullback to four straight sessions, falling 0.5 percent to A$1.2515

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


The New Zealand dollar spent much of the session in a 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 to falling rather than rising later tonight," Speizer said.

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

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

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

New Zealand consumer confidence dipped for a second month in October, although it was still solidly positive. The latest measure of food price added to a picture of benign inflation pressures, with prices down, all pointing to a steady rate outlook into next year. See

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

((Australia/New Zealand bureaux)(+61 2 9373 1800/+64 4 802 7980))