Dollar steadies after a bumpy ride
The Australian dollar was trading slightly higher on Friday, stabilised after a big day of fluctuations on Thursday.
Late in the session the dollar was trading at US90.03¢, up from US89.98¢.
It fell as low as US89.32¢ early on Thursday after the minutes of a US Federal Reserve meeting showed that some policy makers might want to start winding down the Fed's economic stimulus program this year.
It then rallied as high as US90.44¢ after a report showed that Chinese manufacturing activity increased for the first time in four months.
Easy Forex currency dealer Tony Darvall said the dollar had stabilised above US90¢.
"It's not a major move, it's been pretty quiet," he said. "The US dollar strength is not really playing out against the euro or the pound."
Mr Darvall said there would not be a large amount of strength in the US dollar until the Fed actually starts slowing down its asset purchases.
Meanwhile, bond futures prices ended a two-day losing streak, that was sparked by expectation of a tapering of economic stimulus in the US. Expectation that the US Federal Reserve will wind down its $US85 billion-a-month($94 billion) bond purchase program has caused US and Australian bonds to weaken for most of the past two weeks.
Commonwealth Bank interest rate strategist Philip Brown was not surprised by the correction in the Australian market on Friday. "We had a fair bit of a sell off in the last few days, so it's probably enough to calm down a little bit," he said.
The September 10-year bond futures contract was trading at 95.945 (implying a yield of 4.055 per cent), up from 95.915 (4.085 per cent) on Thursday, while the three-year contract was at 97.150 (2.850 per cent), up from 97.130 (2.870 per cent).
During the offshore session on Friday night, markets will be focusing on the release of US new home sales data for July.
Mr Brown said he expects bond markets to be fairly quiet before the release of official Australian business investment figures and expenditure expectations, due out on Thursday.