Dollar edges higher in subdued trade
The Australian dollar was slightly higher on Friday after a quiet day of trade. The currency was buying US91.71¢, up from US91.52¢ on Thursday.
Bond markets gained strength after Detroit became the largest city in US history to file for bankruptcy, after decades of decline in the rundown heartland of American car manufacturing.
But Commonwealth Bank chief currency strategist Richard Grace said the Australian dollar, which is often tied to risk sentiment, appeared to be unfazed as credit ratings agency Moody's upgraded its outlook for the US from negative to stable.
"That would have offset an issue about Detroit," he said. "I don't think it's had a big impact at all."
The dollar had earlier dropped against a resurgent greenback, after stronger than expected manufacturing data and a 24,000 drop in weekly jobless claims.
Bond futures contract prices have finished flat, with 10-year bonds recovering from heavy losses after Detroit files for bankruptcy.
Ten-year bonds had weakened after official US figures showed a 24,000 drop in jobless claims for last week. But those losses were reversed through the day.
Peter Jolly, head of research at the National Australia Bank, said the news of Detroit's bankruptcy hit Asian equity markets and sparked a wild day on the Australian bond market.
"We're recovered those losses on the Detroit story and the weaker Nikkei ... a round trip back to being very little change where we closed last night," he said.
Three-year Australian bonds were marginally firmer as dealers continued to expect an August interest rate cut from the Reserve Bank of Australia after poor business confidence.
"The data over the last two or three weeks has been generally quite soft and it ups the chances of the RBA cutting rates come August," Mr Jolly said.
The September 10-year bond futures contract was trading at 96.325 (implying a yield of 3.675 per cent), down marginally from 96.330 (3.670) on Thursday. The three-year contract was at 97.310 (2.690 per cent), up from 97.300 (2.700 per cent).