US job data may knock the dollar
The local currency is still on track to record a seventh-straight week of declines, but recovered from its low of US89.99¢ to trade around US90.60¢ on Friday.
The US economic data, which will include November payrolls figures and the unemployment rate, could see analysts bring forward their March tapering expectations, placing further pressure on the Australian dollar, currency strategists said.
"It's a huge risk event and markets will want to see that outcome before they start to become a bit more definitive about a possible December taper," NAB currency strategist Emma Lawson said.
Traders also looked through a report on Friday showing that the construction sector expanded for the second straight month.
The Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (PCI) rose 0.8 points to 55.2 in November, on the back of an improvement in new orders and deliveries. It was the highest reading since November 2010.
At the same time, heightened tapering expectations saw yields for 10-year Australian government bonds rise to two-year highs at 4.44 per cent.
"That's the highest it's been since the Fed has been running QE3," UBS interest rate strategist Andrew Lilley said. "That's due to the expectation that QE is likely to be coming to an end. There's still some open debate about how far the Fed has driven the 10-year yield longer and how much the removal of the expectation of further accommodation would cause yields to rise."
Yields on 10-year US Treasuries also returned to September highs, trading around 2.87 per cent.
The Australian dollar is set to be one of the main currencies that could feel the brunt of a strong payrolls report, Citi currency strategist Todd Elmer said. "I think there are a lot of channels by which this [tapering] has fairly far reaching effects that are negative for the Aussie."
Frequently Asked Questions about this Article…
US job data, particularly payroll figures and unemployment rates, can influence the US dollar by affecting expectations around the Federal Reserve's monetary policy decisions, such as reducing bond purchases.
The Australian dollar has been on a declining trend for seven consecutive weeks, although it recently recovered slightly from its low to trade around US90.60¢.
Analysts are focusing on US economic data because it could lead to changes in expectations for when the Federal Reserve might start tapering its bond purchases, which would impact currency markets.
A strong US payroll report could put pressure on the Australian dollar, as it may lead to increased expectations of tapering by the Federal Reserve, which is generally negative for the Aussie.
The construction sector in Australia has been expanding for the second straight month, with the Australian Performance of Construction Index rising to its highest level since November 2010.
Yields for 10-year Australian government bonds have risen to two-year highs at 4.44%, driven by heightened expectations of tapering by the Federal Reserve.
Yields on 10-year US Treasuries have returned to September highs, trading around 2.87%, reflecting market expectations of changes in Federal Reserve policy.
Federal Reserve tapering can have far-reaching effects on global currencies, often leading to a stronger US dollar and putting pressure on other currencies like the Australian dollar.
Call 1300 880 160
Start a chat
Schedule a call
