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Australian dollar dips as higher unemployment boosts chances of October rate cut

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Australian dollar dips as higher unemployment boosts chances of October rate cut

The Australian dollar weakened against its U.S. counterpart as data from the Australian Bureau of Statistics showed the unemployment rate rising to 5.3% in August from 5.2% a month ago, boosting expectations that the country's central bank could cut rates again as early as October.

The seasonally adjusted jobless rate is in line with the consensus estimate of economists polled by Econoday. The Australian dollar traded 0.54% lower against its U.S. counterpart as of midnight ET on Sept. 19.

The number of employed persons rose by 34,700 to 12,926,900 in seasonally adjusted terms, compared with a downwardly revised increase of 36,400 in July.

Full-time employed persons declined by 15,500 to 8,818,000, while the number of unemployed people rose by 4,100 to 716,800. The participation rate climbed 0.1 percentage points to 66.2%.

The Reserve Bank of Australia, which has already cut its cash rate twice this year to a record low of 1%, has repeatedly signaled its willingness to ease policy further to curb unemployment and bring inflation closer to its target.

"This is not an outcome that would please the RBA," said TD Securities analysts, who brought forward their expectations of a rate cut to October from November.

"Given the lag between economic activity and the labor market, the weakness in GDP growth over the first half of this year points to an even sharper slowing in employment growth," said Ben Udy, Australia & New Zealand economist at Capital Economics, in a note. He added, "We think there is now a growing chance that the bank cuts rates to 0.75% as soon as next month."