THE Australian dollar slumped to two-week lows today as employment data confirmed the economy has lost momentum, giving the Reserve Bank of Australia more time to ponder its next move on interest rates. The Australian dollar was trading at $US1.0588, down from $US1.0674 late yesterday. The local currency touched a day's low of $US1.0560. Against the Japanese yen, the Australian dollar was at Y84.83, down from Y85.435. The Australian Bureau of Statistics reported the economy created just 7800 jobs in May, compared with expectations of a 25,000 rise, after a fall of 29,000 in April. Added to this, full-time employment fell 22,000 in May, while part-time employment rose 29,800. The unemployment rate remained at 4.9 per cent for a third month in a row. Government bond prices rallied sharply on the data as traders moved to price out the risk of a near-term interest rate rise. Related Coverage Dollar higher after solid overnight session The Australian, 1 day ago Pressure builds for big four The Australian, 24 May 2011 Dollar recovers after two-week low The Australian, 6 May 2011 Dollar finishes local session at $US1.07 Perth Now, 5 May 2011 Dollar breaks 108.00 US-cent mark The Australian, 27 Apr 2011 Economists said the data affirmed cautious sentiments expressed by Reserve Bank of Australian Governor Glenn Stevens on Tuesday after the central bank's monthly policy meeting. Mr Stevens had highlighted increased uncertainty in the global economy and the impact domestically of a higher Australian dollar and consumer caution, which have weighed on the Australian dollar over the week. The RBA left its cash rate target at 4.75 per cent, where it has remained since November 2010. RBS currency strategist Greg Gibbs said the RBA is unlikely to have to tighten interest rates at all over the medium term. The recent broad flow of data shows the economy is slowing and there seems to be nothing on the horizon that might push the bank to hike, he said. Weaker global share prices also took a toll on the currency. Asian shares were softer, following Wall Street's sixth consecutive fall overnight, traders said. Said IG Markets strategist Ben Potter: "Continued concerns over the health of the global economic recovery are seeing traders cut their exposure to risky assets in favour of safe havens and cash." All eyes now turn to a policy meeting of the European Central Bank tonight (AEST).

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