Dollar bucks trend to move higher

The dollar was trading higher despite expectations the US Federal Reserve will taper its stimulus program sooner rather than later.

The dollar was trading higher despite expectations the US Federal Reserve will taper its stimulus program sooner rather than later.

Late on Friday, the dollar was trading at US90.50¢, up from US90.34¢ on Thursday.

The dollar earlier fell below US90¢ for the first time since September after data showed the US economy grew at 3.6 per cent in the 12 months to September.

The currency then rallied to US91.76¢, in line with a rally in the euro after European Central Bank president Mario Draghi said the ECB was in no hurry to cut its interest rate.

ForexCT head of research Steven Dooley said the dollar managed to hold on to its gains on Friday, despite speculation US employment figures, out late on Friday, would be strong.

"The Australian dollar is certainly trying to go lower. The push higher last night confounded quite a few people," he said.

"Something we've seen over the past couple of days in the market has been a reversal of sentiment.

"The Aussie dollar having traded below US90¢ this week was looking very, very bearish and of course everyone is looking ahead to the US job number."

Mr Dooley said if US employment growth was strong the US dollar would rally and the Aussie could fall below US89¢.

Meanwhile, the bond market was weaker.

UBS interest rate strategist Andrew Lilley said signs that the US recovery was being sustained meant the Fed could wind back its economic stimulus.

"The US data that we've received this week was strong," he said.

"This has brought the attention of the Fed meeting to the forefront of the market's thinking and we've seen values of all financial assets decline, from equities to bonds."

Late on Friday, the December 10-year bond futures contract was trading at 95.630 (implying a yield of 4.360 per cent), down from 95.665 (4.335 per cent) on Thursday.

The three-year contract was at 96.840 (3.160 per cent), down from 96.860 (3.140 per cent).

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