Dollar rises but betting on its future is only for the brave

Investors are betting on the Reserve Bank taking its foot off the interest rate easing pedal, with the Australian dollar rising more than US2¢ this week.

The Aussie's rally began on Tuesday when the RBA decided to keep interest rates on hold and made no mention of another possible cut in the months ahead.

"Markets have this funny thing that if the RBA is not easing, then they must be hiking," NAB currency strategist Emma Lawson said.

"[Markets think] they're not likely to keep rates on hold for very long. They took the [RBA's] relatively unchanged statement on Tuesday that they have done [with] easing."

The Aussie was strengthened further on Wednesday when quarterly GDP figures came in slightly higher than expected (0.6 per cent versus 0.5 per cent) and hit a high of US91.87¢ in overnight trade.

But the bounce could be nearing an empty tank of fuel, analysts say.

Westpac currency strategist Sean Callow said it would be "very brave" to take an aggressive view on the Aussie before the release of US payroll data on Friday, which could dictate the fate of the Federal Reserve's $US85 billion-a-month stimulus program - the tapering of which is widely tipped to begin this month.

But Mr Callow said the US employment data, which is difficult to forecast, could change that prediction.

"Who knows what it's going to be? Everybody has trouble forecasting US employment," he said.

"If it's unexpectedly weak, it calls into question the whole argument whether the Fed will start reducing stimulus. If it's strong, then the US dollar will probably rise and the Aussie will come off, so we are getting to some pretty dangerous territory for Aussie traders."

The Australian dollar came under pressure during early trade on Thursday, falling about a quarter of a cent to US91.63¢ following the release of poor trade figures.

Australia's trade balance dived $765 million into the red in July. Analysts were expecting a modest surplus of $100 million after June's $243 million surplus.

The dollar was trading at US91.55¢ about 5pm.

ANZ currency strategist Andrew Salter said he believed the dollar could edge higher.

"We are starting to tell our clients from 92 through to 95 is [when] you should start positioning for longer-term depreciation in the currency," he said.

"There is quite a high degree of short positioning in the market, so the market is expecting the currency to go down when the information we have been getting is telling us it should go higher.

"That is challenging those short positions and a lot of investors are stopping out of them and in the process pushing the currency higher."

Mr Salter still expected some volatility and said it was hard to be precise about currency targets because it depended so much on global economic data and unpredictable events.

"But all that being said, the fundamentals for the world economy are slightly improving - that's a positive," he said.

"China's growth is appearing to [stabilise] ... and the short positioning in the currency is going to be impetus to get [the Aussie] up."