Trading in limbo ahead of Fed move

The Australian dollar was trading slightly lower on Friday as traders looked ahead to a key meeting of the US Federal Reserve next week.

The Australian dollar was trading slightly lower on Friday as traders looked ahead to a key meeting of the US Federal Reserve next week.

The currency was trading at US92.37¢, down from US92.43¢ on Thursday.

It fell sharply on Thursday after official figures showed Australia's unemployment rate rose to 5.8 per cent in August.

ForexCT head of research Steven Dooley said the currency recovered some ground early on Friday but then moved lower.

"It was a bit of a dead cat bounce," he said.

Mr Dooley said the market was focused on next week's meeting of the US Federal Reserve.

He said many within the financial sector expected the central bank would begin to taper its bond-buying program.

"Really the market is just in wait-and-see mode, with a gentle downward bias," he said.

"It's all about the Federal Reserve next week."

Meanwhile, bond futures prices spent the local session trading lower after a similar move in US Treasuries on Thursday.

Westpac strategist Damien McColough said US Treasury yields moved higher (and prices lower) after an auction of 30-year bonds.

Australian bonds moved lower as a result but the market was subdued due to the rollover of futures contracts on Monday.

"It's one of those days when everyone is focused on the futures roll," he said.

At the close of business on Friday, the September 10-year bond futures contract was trading at 95.905 (implying a yield of 4.095 per cent), down from 95.965 (4.035 per cent) on Thursday.

The three-year contract was at 97.025 (2.975 per cent), down from 97.070 (2.930 per cent) on Thursday.

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