Aussie dollar stages cautious recovery

The Australian dollar was trading slightly lower on Friday after recovering most of the losses it made after the release of strong US jobs figures.

The Australian dollar was trading slightly lower on Friday after recovering most of the losses it made after the release of strong US jobs figures.

Late in the session, the dollar was US91.57¢, down from US91.71¢ on Thursday. It hit a low of US90.59¢ early on Friday, after weekly US jobless claims fell to their lowest level since October 2007.

The data added to speculation that the US Federal Reserve will make an announcement on winding back its economic stimulus plan at the September 17 and 18 Federal Open Markets Committee meeting.

The dollar staged a recovery helped by stronger commodity prices and an early rally on the Chinese sharemarket, CMC Markets senior trader Tim Waterer said.

"It could be described as a cautious move higher, particularly in light of growing expectations that US tapering could be imminent which would benefit the greenback," he said. "Investors will be going over each US economic indicator with a fine-tooth comb in assessing how each release may sway the Fed's thinking."

Meanwhile, the bond market continues to sell off as the Fed moves closer to tapering its economic stimulus. Helping to fuel the speculation was data out on Thursday night that showed a fall in the weekly US jobless claims, dropping to its lowest point since October 2007.

"We've just continued to peel off all week," Westpac senior market strategist Damien McColough said. "In terms of triggers they've all been offshore, sentiment is quite negative".

On Friday night, (AEST), official US housing starts and building permits data for July will be released. Mr McColough said the data would be important to the debate about when the FOMC will start its tapering.

The September 10-year bond futures contract was trading at 96.020 (implying a yield of 3.980 per cent), down from 96.100 (3.900 per cent) on Thursday. The 10-year prices are now at their lowest level since April 2012. The three-year contract was at 97.200 (2.800 per cent), down from 97.270 (2.730 per cent).