Advances in currencies were stalled by fears of a Sino-U.S. trade war

Most Asian currencies firmed on Thursday. But advances in currencies were stalled by fears of a brewing Sino-U.S. trade war.

The Australian dollar lagged its peers after dismal labour data ramped up bets on a November interest rate cut by the Reserve Bank (RBA).

Traders still remained broadly risk averse, with gold hitting new record highs on Thursday.

The Australian dollar’s AUD/USD pair dropped 0.3% on Thursday, with the currency lagging its regional peers following weak labour data for September.

Australian employment growth missed expectations, while unemployment unexpectedly jumped to a four-year high. Data for August was also revised lower, pointing to a sharper decline in the labour market than previously estimated.

The weak labour data ramped up bets that the RBA will have enough impetus to cut interest rates in early-November, especially as it moves to avoid further employment declines.

The central bank has flagged inflation and labour growth as its two biggest considerations for cutting rates.

But analysts warned that inflation likely turned sticky in the third-quarter and could still push the RBA into keeping rates unchanged. The RBA cut rates by a cumulative 75 basis points this year.

Broader Asian currencies extended their gains on Thursday.

The yen’s USD/JPY pair dropped 0.2%, firming amid growing doubts over Sanae Takaichi’s prime ministership.

While Takaichi was elected leader of the ruling Liberal Democratic Party, the LDP’s opposition parties were reportedly seen considering backing their own prime ministerial candidate.

The won’s USD/KRW pair declined 0.1%, while the Singapore dollar’s USD/SGD pair shed 0.2%.

The Indian rupee’s USD/INR pair shed 0.1%.

The yuan’s USD/CNY pair slipped slightly, steadying after a series of strong midpoint fixes by the People’s Bank sparked strong gains in the currency. The yuan had also largely firmed past weak inflation data for September.