SYDNEY, Aug 17 Reuters Australia employment unexpectedly fell in July to end two months of very strong growth, while the jobless rate ticked higher in a sign the drumtight labour market might finally be loosening.

The softer reading stoked speculation the Reserve Bank of Australia RBA might be done hiking interest rates and dragged the local dollar down to ninemonth lows at 0.6366 .

Figures from the Australian Bureau of Statistics ABS on Thursday showed net employment fell 14,600 in July from June, reversing some of June39;s 31,600 jump and confounding market forecasts of a 15,000 rise. All the losses were in fulltime jobs which dropped 24,200.

The jobless rate rose to 3.7, from 3.5, topping analysts39; forecasts of 3.6 and the highest reading since April.

The ABS cautioned that the figures were likely impacted by the timing of school holidays in July, which could have artificially depressed the numbers.

However, on the face of it the report seemed to support the RBA39;s case for a turning point in the market which should help lessen inflationary pressures.

The central bank has paused rate hikes for two months now and investors suspect it may be done tightening. Futures imply only a 5050 of one more quarterpoint hike to 4.35 by the end of the year.

Today39;s data are likely to be the final nail in the coffin for any lingering expectations of a rate hike in September, said Ben Udy, lead economist for Oxford Economics Australia.

Even so, the deterioration in the…