Dollar retreats before Chinese data

The Australian dollar was trading lower as traders prepared for the release of important Chinese manufacturing data.

Late on Friday, the dollar was at US96.41¢, down from US96.73¢ on Thursday.

CMC Markets foreign exchange dealer Tim Waterer said it had been a relatively quiet day and the dollar pulled back late in the session before the Chinese data on Saturday.

The official Chinese Purchasing Managers' Index will show whether activity in the vital manufacturing sector expanded or contracted last month.

The fall in the dollar capped off the currency's biggest monthly drop in a year, down from US103.84¢ at the start of May.

Mr Waterer said next week would be critical for the currency as important economic data would be released, including gross domestic product figures for the March quarter on Wednesday and US employment figures for May, on Friday.

The Reserve Bank will hold its monthly board meeting on Tuesday and will decide whether to cut the cash rate again, although most economists expect the rate to remain on hold at its record low of 2.75 per cent.

Meanwhile, bond futures prices moved a little higher as traders prepare for what is likely to be a busy week of trading.

Westpac senior strategist Damien McColough said the market had been relatively quiet on Friday. "The market still thinks there is a small door open for a rate cut," he said.

At the close on Friday, the June 10-year bond futures contract was trading at 96.635 (implying a yield of 3.365 per cent), up from 96.595 (3.405 per cent) on Thursday.

The three-year contract was at 97.400 (2.600 per cent), up from 97.380 (3.620 per cent).