The Australian dollar has lost ground after dire local jobs data underlined the economic toll of fighting the coronavirus, while a flare-up in concerns about North Korea hurt risk sentiment across Asia.
The Aussie slipped 0.6 per cent to 62.95 US cents and away from a high of 63.98 US cents on Monday. It now has support at 62.64 US cents, with sellers likely to move in when the currency gets up to last week’s peak at 64.45 US cents.
Part of the pullback came when markets were spooked by reports North Korean leader Kim Jong Un was ill after undergoing a cardiovascular procedure early this month.
South Korea’s Yonhap news agency later cited a government official saying Kim was not seriously ill.
The risk of political instability in the rogue nation sent the South Korean won sliding and lifted the US dollar, while unsettling stocks across the region.
In Australia, the damage done by the coronavirus lockdown was all too clear as the Bureau of Statistics reported that 6 per cent of all jobs in the country were lost in a brief period between March 14 and April 4.
That would equate to a huge 780,000 jobs out of a workforce of 13 million.
“Rising unemployment will hit consumer spending, home prices and wages growth,” said Diana Mousina, a senior economist at AMP Capital. “Inflation will also be lower than expected. We expect underlying inflation to be around 1 per cent by the end of the year.”
“At least policy makers are willing to do whatever is necessary to keep the economy from spiralling into depression.”
The Reserve Bank of Australia (RBA) has already cut rates to 0.25 per cent and targeted a similar level for three-year bond yields by buying government debt in the market.
Minutes of the bank’s April meeting on Tuesday showed it feared economic output would shrink markedly this quarter and remain subdued through the third quarter as well.
RBA Governor Philip Lowe is due to speak on the economic outlook and answer questions later on Tuesday.
The bond market is keen to hear more detail on the bank’s bond buying intentions given it has scaled back purchases sharply in the last couple of weeks, even as the government has massively ramped up its borrowing.
On Tuesday, three-year bond futures were a fraction lower at 99.735, implying an yield of 0.265 per cent, while the 10-year contract eased 1.5 ticks to 99.1550.