The Australian dollar fell on Thursday after a softer-than-expected jobs report kept alive the risk of an interest rate cut next month.

Australia's labour market shed 5,500 jobs in December, missing forecasts for a flat outcome. The jobless rate nudged up to 5.4 per cent from 5.3 per cent as expected.

The Aussie lost about 0.6 per cent and dipped below $US1.0500 for the first time in a week, pulling back from a session high of $US1.0577. Traders said stop-loss selling kicked in following a break below $US1.0530/20. It last stood at $US1.0510.

Against the yen, it suffered a bigger loss, sliding 0.8 per cent to 92.62 yen, pulling further away from four-year highs of 94.65 set Tuesday.

Interbank futures showed a one-in-three chance of a cut to the 3.0 per cent cash rate at the Reserve Bank of Australia's (RBA) next policy meeting on February 5, while swap rates imply an eventual move to a historically low 2.5 per cent this year.

"The RBA will find it hard to resist further cuts in the cash rate as the unemployment rate continues to rise," said Spiros Papadopoulos, senior economist markets at National Australia Bank.

Despite the fall, the Aussie remained within easy reach of a four-month peak around $US1.0600 set last week. Initial support is found near $US1.0500, a level representing the 38.2 per cent retracement of its Dec. 26-Jan 10 rally. Major resistance is seen around $US1.0600.

Australian bond futures also chalked up modest gains, with the three-year contract up 0.06 points at 97.300 and the 10-year contract 0.055 points higher at 96.720.

Reuters