Australian dollar touches US90c again

THE Australian dollar today closed higher and above US90c for the second time this week, after the domestic jobless rate fell to a fresh 33 year low.

The fall to 4.2 per cent in September - the lowest level since November 1974 - from 4.3 per cent in August, stoked speculation of another interest rate rise next month, pushing the unit higher.

At 5pm ( AEST), the Australian dollar was trading at US90.08c/US90.10c, up from yesterday's close of US89.87c/US89.92c.

During the day, it traded between a low of US8.966c and a high of US90.15c.

But Westpac chief currency strategist Robert Rennie said the initial market reaction to the jobless rate was limited because traders had anticipated that the data would reflect strong economic conditions.

"I think, for us to vault US90c and forge ahead at the pace we have become used to probably looks a bit less likely,'' he said.

"We would need to see a weakness in the US dollar and I think we have to see strong evidence that the Australian economy is accelerating.''

The domestic currency walked towards US90c late in the afternoon session, hours after the Australian Bureau of Statistics (ABS) released the September labour force report.

Mr Rennie said traders were forming the view that the Reserve Bank of Australia (RBA) would have to raise interest rates sooner rather than later.

"Certainly, today's data does add to the risk,'' he said.

"The strength of our domestic economy requires some further intervention from the RBA,'' he said.

The futures market has priced in a 70 per cent chance of an interest rate rise by the end of 2007.

The ABS also revealed that total employment in September rose by 13,000 to 10.528 million, seasonally adjusted.

Economists had expected total employment to rise by 20,000 jobs and a jobless rate of 4.3 per cent.

Full-time employment decreased by 17,200 to 7.522 million and part-time employment was up 30,100 to 3.005 million.

The participation rate in September was 65 per cent, compared with an unrevised 65.1 per cent in August.

Adding to speculation of a rate rise by the end of 2007 was the Melbourne Institute consumer inflationary expectations survey of 1200 consumers that found median inflationary expectations had jumped to 4.6 per cent in October, up from 3.1 per cent, to reach their highest level in two years.

The Australian dollar's overnight range is tipped to mirror today's pattern.