The Australian dollar just suffered its largest weekly decline in more than a year, tumbling back below the 80 cent level on Friday.
The AUD/USD finished the session at .7920, down 1.5% from Thursday’s closing level. It was the largest one-day percentage loss since May 3, 2017.
At five sessions, the Aussie’s current losing streak is the equal-longest since July 2015. At 2.33%, the weekly decline was also the largest since November 2016.
Friday’s selloff was sparked by the release of another strong US jobs report, especially when it came to wage growth.
Average hourly earnings rose by 0.3% in January, leaving the increase on a year earlier at 2.9%, the fastest since the global financial crisis. It was well above the 2.5% annual pace reported in December and easily surpassed market expectations for a smaller increase to 2.6%.
Higher wage growth typically translates to a pickup in domestic inflationary pressures.
The strong earnings figure, combined with a 200,000 increase in non-farm payrolls and steady unemployment rate at 4.1%, created ripples across financial markets, sending US bond yields surging to fresh multi-year highs.
Riskier asset classes, such as stocks and commodities, were hammered lower by the increase in yields, sparking a wave of profit-taking after a strong start to the year.
The Aussie, seen by many to be a proxy for investor risk appetite, was not immune the carnage.
Along with souring investor sentiment, the AUD/USD was also undermined by the increase in US yields with the spread between Australian and US 10-year swap rates turning negative for the first time since 2000.
That means US yields are now higher than Australian yields, making the Australian dollar less attractive to foreign investors.
Currency markets will reopen at 5am on Monday, February 5.