Plunging gold price knocks dollar

The Australian dollar is weaker after the price of gold fell below $US1200 an ounce for the first time in almost three years.

Late on Friday, the local currency was trading at US92.62¢, down from US93.17¢ on Thursday.

ForexCT head of research Steven Dooley said the gold sell-off was related to the US Federal Reserve's comments on scaling back the $US85 billion-a-month ($92 billion) bond purchase program, designed to stimulate the economy.

"A lot of institutions or hedge funds in Asia were taking a lot of pain from their gold positions and they were forced to liquidate and that's dragging the Aussie dollar down," he said.

CMC Markets senior trader Tim Waterer said people were selling riskier assets and taking profits before the end of the financial year.

"Month-end position squaring created some downward price pressure on the Australian dollar, with the currency also being hindered by further weakness in the gold price," he said.

The Australian dollar started the financial year trading at US102.66¢, and so far has lost 9.8 per cent against the greenback.

The Australian dollar was at ¥91.58, down from Thursday's close of ¥91.31, and at €70.97¢, down from €71.49¢.

Meanwhile, Australian bond futures prices were higher in a quiet day for local bonds compared with earlier in the week.

Westpac interest rate strategist Tim Jung said the rally in bond futures prices was probably the result of investors taking profits and moving out of more volatile assets at the end of the month.

The September 10-year bond futures contract was at 96.225 (implying a yield of 3.775 per cent), up from 96.160 (3.840 per cent) on Thursday. The three-year contract was at 97.220 (2.780 per cent), up from 97.140 (2.860 per cent).