The Australian dollar held on to most of its recent hefty gains on Friday despite a bout of profit-taking, to make their best monthly performance in as long as a year.
The Australia dollar was trading at $US0.9010, just off a high of $US0.9022 hit earlier in the day. One trader said a range of investors were taking profits after its half-a-cent gain offshore on Thursday.
At the local close, the dollar was buying $US0.9012/14 cents, up from $US0.8991/93 a day earlier.
It was also buying 68.9 euro cents, 57.6 pence and 77.9 yen.
For all of July, the Australia dollar was up 7 per cent, its best performance in any month since June 2009, lighter trading
volumes notwithstanding.
Jonathan Cavenagh, an analyst at Westpac, said disappointing US economic data had walloped the US dollar and benefitted the pair of currencies. He said the Australia dollar had another leg-up with its high-yield allure.
"The Australian-US yield differential is still very, very attractive," Cavenagh said. "But I think the Aussie dollar would struggle to build much momentum above $US0.90."
The spread between two-year Australian and US yields stood at a hefty 400 basis points on Friday, a slight pull-back from a two-year peak of 411 basis points hit earlier this week.
He said concerns the US economy is losing steam in its recovery, and bets that Australian rates will not rise much further from here should combine to weigh on the Aussie dollar.
To be sure, the Reserve Bank is seen leaving rates unchanged at 4.5 per cent at its next policy meeting on Tuesday.
The market is not holding its breadth for more rate rises in coming months either. It is priced for only a 40 per cent chance for rates to rise to 4.75 per cent by March.
Against the yen, the Aussie dollar was also softer at 77.79, from Thursday's 78.50, and compared to the week's high of 79.42.
Australian bond futures were firm. Three-year bond futures were up 0.07 points at 95.35, and 10-year futures rose 0.045 points to 94.80.
Reuters, with AAP
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