$A propped up by European rate cut

The Australian dollar is higher after the European Central Bank cut its key interest rate.

The Australian dollar is higher after the European Central Bank cut its key interest rate.

Late on Friday, the local unit was trading at US102.54¢, up from 102.36¢ on Thursday.

The Australian dollar strengthened early on Friday after the ECB's decision to cut its refinancing rate to a record low of 0.5 per cent and stronger US unemployment and trade data, which helped boost equity markets.

However, traders said the currency's rally has slowed as traders await the release of non-farm payrolls - the US employment measure - for last month.

Anticipation of the Reserve Bank board meeting on Tuesday would have also capped the rally in commodity currencies, traders added.

The RBA is widely expected to keep the cash rate at a near record low of 3 per cent, but most economists believe there will be a cut some time this year.

On Friday afternoon, the Aussie fell to an almost 3-year low against the New Zealand dollar.

It dropped to 120.31 New Zealand cents, its lowest level against the trans-Tasman neighbour since December 2009.

The NZ dollar has had a recent surge as the nation's government bonds prove popular with investors because of their above 3 per cent yield, which is relatively high compared with other nations.

Late on Friday, the Australian dollar was at 100.51 Japanese yen, up from Thursday's close of 99.57 yen, and at 78.26 euro cents, down from 78.83 euro cents.

Meanwhile, Australian bond futures prices were almost level.

UBS interest rate strategist Matthew Johnson said it had been a very quiet local session for the bond market, with little news to drive price movements.

"It's gone completely sideways all day, which is kind of normal pre-payrolls," he said.

"There is basically nothing going on, People are waiting for payrolls tonight."

Mr Johnson said better US jobless claims numbers pushed bond futures prices lower in offshore trade on Thursday night.

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