Dollar comes under more pressure
The Australian dollar was trading lower on Friday, driven down by strong US data, a weak local inflation measure and a bleak federal government budget forecast.
The currency was trading at US89.07¢, down from US89.58¢ on Thursday.
The US dollar rose after jobless claims dropped to their lowest in almost six years and an Institute for Supply Management manufacturing report for last month also came in much stronger than expected.
Locally, the Producer Price Index (PPI) for the June quarter - a measure of prices at the factory or farm gate before transport and other costs are added - rose 0.1 per cent, lower than the 0.3 per cent rise in the March quarter, Bureau of Statistics data showed.
ANZ foreign exchange strategist Andrew Salter said the Aussie also came under pressure after the government said the budget deficit was now expected to be $30.1 billion in 2013-14, rather than the $18 billion estimated in the last budget.
"The Aussie dollar has just been on the back foot all day while the US dollar has been stronger," Mr Salter said.
"The PPI data that we received did actually pressure the currency lower and the revision of the budget forecast and the revenue shortfall did weigh on sentiment."
Bond futures prices followed US Treasury bonds lower after the release of the US economic data.
Westpac senior market strategist Damien McColough said bond futures prices fell after US jobless claims dropped to their lowest in almost six years.
"The bearish momentum was established overnight with US Treasuries," Mr McColough said.
"Following the data, all the things you would expect to happen happened, so there was equity strength, currency strength and bond yields rising, which pushed our bonds a bit lower."
Mr McColough said the release of the government's economic statement had not had a major impact on Friday's prices.
"I wouldn't suggest that was a major driver of the price action," he said.
"But we do have a bigger budget deficit which needs to be filled by government bonds."