Dollar slips on US stimulus cut fears

The Australian dollar was trading lower after strong economic growth figures from the United States raised the possibility that the US Federal Reserve could start tapering its stimulus program sooner rather than later.

The Australian dollar was trading lower after strong economic growth figures from the United States raised the possibility that the US Federal Reserve could start tapering its stimulus program sooner rather than later.

Late on Friday the dollar was trading at US94.65¢, down from US94.83¢.

The US economy grew by 2.8 per cent in the year to September, much stronger than the 1.9 per cent analysts were expecting.

FXCM analyst David de Ferranti said the figures sparked a US dollar rally against most major currencies.

"The move came as traders piled out of risky assets on expectations that stronger growth figures for the world's largest economy would imply a timelier Fed taper, a dangerous prospect given how low [bond] yields are historically," Mr de Ferranti said.

"While the upbeat economic growth figures paint an encouraging picture, the decisions taken by the Federal Reserve remain very dependent on the labour market outlook."

The US Labour Department was to release non-farm payrolls for October, the key American employment indicator, on Friday night.

"[The] data will help provide some further colour to the pace of recovery of employment in the US and give a better indication of when the central bank may back off the stimulus," Mr de Ferranti said.

Employment growth is expected to be 120,000, which was distorted by the government shutdown during the month, and the unemployment rate is forecast to rise by 0.1 per cent to 7.3 per cent.

Meanwhile, bond futures were higher after the European Central Bank surprised markets by cutting its interest rate.

The ECB cut its "refi", or refinancing rate, by a quarter of a percentage point to a new record low of 0.25 per cent, to help support the struggling European economy.

The December 10-year bond futures contract was trading at 95.915 (implying a yield of 4.085 per cent), up from 95.885 (4.115 per cent) on Thursday.

The three-year contract was at 96.900 (3.100 per cent), up from 96.860 (3.140 per cent).

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