Steady outlook, with a downward bias
Late in the session, the dollar was trading at US103.43¢, up from US103.17¢ on Thursday.
"The softness in commodity prices is acting as a strong offset to the impact of monetary printing in the US and Japan on the Australian dollar," said AMP Capital chief economist Shane Oliver.
"As a result the Australian dollar looks like remaining range bound, but with a bit of a downwards bias into mid-year if shares and commodities continue to correct."
Global sharemarkets fell for most of the week after China released weak growth figures and the International Monetary Fund downgraded its global growth forecast.
The key driver for the dollar in the week ahead will be the first quarter inflation data, due on Wednesday.
In the Reserve Bank board minutes for April released this week, the central bank noted interest rate-sensitive parts of the economy were responding to previous rate cuts.
Meanwhile, bond futures were little changed despite signs money is starting to flow into the local market from Japan following recently announced stimulus measures.
Nomura head of fixed income Jon Linton said local bond futures traded in a narrow range during Friday's local session.
"It's been very quiet, the market hasn't really moved," he said.
Mr Linton said money had begun flowing in from Japan for the first time since the Bank of Japan announced stimulus measures this month. He said the highly anticipated move had been slow to materialise following the bank's April 4 announcement it would spent 7 trillion yen ($70 billion) a month on Japanese government bonds in an effort to boost inflation.
"Over the past 24 hours there has been a little bit of buying coming into the market, which there hasn't been since the BoJ's announcement," he said.
The June 10-year bond futures contract was trading at 96.8 (implying a yield of 3.2 per cent), down from 96.81 (3.19 per cent) on Thursday.
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The Australian dollar is expected to remain range-bound but with a slight downward bias into mid-year. Key influences are weakness in commodity prices, the impact of monetary printing in the US and Japan, and corrections in shares and commodities, according to AMP Capital chief economist Shane Oliver.
Late in the session the Australian dollar was reported trading at US103.43¢, up from US103.17¢ on the previous day, reflecting small day-to-day movements amid broader market uncertainty.
Weak growth figures from China weighed on global sharemarkets and the Australian dollar. For everyday investors, this can mean more volatility in equities and commodities, and potential downward pressure on Australia’s resource-linked stocks and the currency.
First-quarter inflation data is a key driver for the Australian dollar in the near term. Inflation results can influence expectations for interest rates and market sentiment, which in turn affect currency moves, bond yields and equity prices.
The RBA's April board minutes noted that interest rate-sensitive parts of the economy were responding to previous rate cuts. For investors, this suggests monetary easing is feeding through to the economy, which can support growth-sensitive assets but may also keep yields lower.
Bond futures were little changed and traded in a narrow range, indicating a quiet market. However, there were signs of money starting to flow into the local market from Japan after that country’s recent stimulus measures. For investors, shifts into bonds can affect yields, fixed income returns and asset allocation decisions.
Following the BoJ’s announcement that it would spend 7 trillion yen a month on Japanese government bonds, there were early signs of buying interest from Japan into Australian bond markets. While the move had been slow to materialise, it has begun to bring some foreign demand into local bonds.
The June 10-year bond futures contract was trading at 96.8, which implies a yield of about 3.2 per cent, slightly down from 96.81 (3.19 per cent) reported on Thursday.
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