The Australian dollar rose over half a cent while bill futures fell after surprisingly strong jobs report reawakened the risk of a further hike in interest rates.

The local unit jumped to $US0.8730, from $US0.8670 just before the government declared 45,900 jobs had been added in June, surpassing predictions of a 17,500 growth. The Aussie dollar had climbed overnight as a billow in global equity markets helped improve the mood on risk.
Bill futures registered early losses as the market erased the possibility of a rate reduction and instead priced in more risk of a further increase in interest rates.

According to RBC capital markets economist Su-Lin Ong, the Australian dollar had been bolstered by Australian Bureau of Statistics data for June reflecting an unemployment rate of 5.1 per cent amid a 45,900 rise in total jobs. It was the smallest number of unemployed since the onset of 2009.

''(The Australian dollar) moved half a cent on it immediately and bonds sold off pretty quickly,'' Ms Ong said. ''There are no quirks in this data; it just shows strength.''

Ms Ong believes the data enlarge the possibility of an August rate increase from the Reserve Bank of Australia because the nation is now close to full employment while inflation is edging higher.

''You have inflation a little on the high side when there's little spare capacity in the labour market.''These kinds of numbers will put pressure on the RBA to hike.''

Ms Ong expected the local unit to rise further for the rest of the trading day, although she refused to quantify.