The rise in the unemployment rate caused heavy losses in the Australian dollar on Thursday as the currency fell for a second day, reversing almost all of its gains since the Reserve Bank of Australia policy meeting two days earlier. 
The currency greeted the jobs report initially with great optimism, causing a spike to US74.01Â¢ as traders responded to the bigger than expected number of jobs created last month - 38,500. But focus quickly turned to the higher unemployment rate and the Australian dollar staged a sharp downward turn.
It traded as low as US73.21Â¢ after the implications of the jobs report sunk in. The rate of unemployment rose to 6.3 per cent in   July, from 6.1 per cent in   June as participation increased.
Economists said this was consistent with the top end of the Reserve Bank's forecasts but, on balance, it supported the case for further policy easing. The central bank's quarterly statement of monetary policy is due on Friday.
Westpac's senior currency strategist Sean Callow said on deeper analysis, the unemployment rate came in at 6.349 per cent, more bearish than the Australian Bureau of Statistics' 6.3 per cent headline figure betrays.
"Overall, you'd have to say the price action is quite interesting because we were presented with a report that really could have been read either way by markets," he said.
Late in the session the currency was fetching US73.33Â¢.
"Obviously the unemployment rate has unsettled people ... It just looks as though the market's still in a mood to sell Aussie dollars and in particular, the global commodity story is just too negative to ignore," the strategist said.
"The CRB index is probing to lows around 2003, that's one international investors look at," he added, referring to the Thomson Reuters/CoreCommodity CRB Commodity Index, which has fallen below 200 points. It is down 32 per cent over the past year.
Mr Callow said that the new information on jobs was slightly inconsistent with the tone of the Reserve Bank's language around the labour market in Tuesday's statement. At the time, RBA governor Glenn Stevens said: "The rate of unemployment, though elevated, has been little changed recently."
The central bank might end up revising that view upon receiving the   July unemployment rate. "They'd be a little less comfortable about using that phrase as of [Thursday]," Mr Callow said. "Overall, the vibe on the Aussie dollar has cooled since Tuesday. On Tuesday, we were looking on the bright side and we had the reduction in pricing in RBA easing."
The   July policy meeting also coincided with a better than expected retail sales number for   June of 0.7 per cent, and a terms of trade deficit that was marginally better than expected.
Most economists still think the RBA will keep cutting interest rates.
"The figures should not encourage a shift in policy direction from the overtly neutral stance reiterated earlier this week," said Mark Walton from BNP Paribas in a report to clients. He saw the data as consistent with the broader trend of steady employment growth and a stable unemployment rate. "The RBA is likely to be encouraged by the underlying trends, which remain consistent with a pick-up in employment growth over the past year," he said.