The dollar rose to a five-week high after data showed the country recorded its strongest monthly employment growth in close to 12 years in February, diminishing the chance of more immediate rate cuts that might push the currency lower.
At 4.10pm AEDT, the Aussie fetched $US1.0365 compared with $US1.0318 late yesterday. It traded as high as $US1.0381 in Asia.
The number of people employed rose by 71,500 from January, driven by a surge of 53,700 part-time workers, according to Australian Bureau of Statistics data published today. Economists had expected a 10,000 increase overall in the job market.
Still, Australia's unemployment rate remained at 5.4 per cent in February as more people actively sought work during the month.
Traders said the surge in job creation, while subject to statistical volatility, argued strongly against further cuts in interest rates.
"This seems likely to reinforce the RBA's confidence that sitting on their hands is the right stance," said Sue Trinh, currency strategist at RBC Capital Markets in Hong Kong.
Financial markets are now pricing in another 10 basis points of interest rate cuts by the Reserve Bank, down from 50 basis points last month.
The RBA last week kept interest rates on hold for the second month at 3 per cent, matching a low reached after the global financial crisis. It cited a nascent recovery in key parts of the economy, including housing and retail.
Justin Fabo, an economist at ANZ, said markets had moved quickly to trim back expectations of more interest rate cuts. He added that if the unemployment rate had already peaked at 5.4 per cent, the RBA could move to the sidelines.
The ANZ's official forecasts still call for another two 25 basis points of cuts this year.
