Brighter US job outlook weighs on dollar

The Australian dollar is set to continue its fall to below US90¢ this week, amid further signs of an improvement in the US economy, the world's biggest.

The dollar was buying US90.6¢ late on Friday after better-than-expected US jobs data triggered a surge in the greenback. It had been buying US91.83¢ in earlier trading.

A report showing the US jobs market had improved last month was taken as a sign the Federal Reserve could begin to rein in its stimulus spending sooner rather than later.

Wall Street closed stronger on Friday. The benchmark S&P500 closed up 1.02 per cent at 1631.89 despite the data sending US Treasury bond yields higher.

Wilson HTM Investment analyst Peter Esho predicted a flat open on Monday for the local exchange as investors wait for official monthly Australian employment numbers on Thursday. Total employment is expected to remain flat at about 11.7 million with the unemployment rate to rise to 5.6 per cent from 5.5 per cent.

If the numbers deteriorate, the Reserve Bank might lower interest rates next month, putting downward pressure on an already falling dollar, he said.

"I think the market will stay flat until Thursday's job numbers before we start seeing some volatility either upwards or downwards," Mr Esho said.

BK Asset Management managing director Kathy Lien said the US dollar was likely to continue its rally, as investors interpreted the jobs numbers as a sign the economy had improved to the point of no longer needing government support.

"Investors [on Friday] were looking for confirmation that the economy could handle a reduction in stimulus," she said.

"They also wanted evidence that the labour market is improving like the Fed predicts."

Ms Lien said investors were now anticipating an official cut to Fed spending sooner rather than later.

"There is only two real opportunities for them to do so this year - September and December. This is such a major monetary policy shift that Federal Reserve chairman Ben Bernanke will want to clarify the central bank's position and press conferences are scheduled after both of those meetings."