The Australian dollar peeled away from three-week highs on Friday investors turned cautious before a US jobs report that could make or break the latest tentative improvement in risk appetite.
At the local close of trade, the dollar was buying $US0.9082, just above yesterday’s close of $US0.9073 and well above the week's $US0.8858 trough, but down from an early $US0.9122 peak during the trading day.
The currency benefited in recent days from upbeat domestic and global data than countered some of the market's worst fears of a world slowdown.
However, dealers were wary in case the US payrolls report disappointed as it has done in the past.
"Jobs are like a light switch for the market," said a dealer at a local bank. "Upside surprise - all is bright and risk is on. Bad numbers - risk is off and we're back in the dark."
"Our suspicion is that the solid employment reading in the ISM survey means the report could provide a pleasant surprise and get the Aussie above $US0.9120," he added. "Though it would have to be really good to break the $US0.9220 barrier."
The employment measure of the ISM manufacturing survey out this week unexpectedly climbed to 60.4 in August, from 58.6 the previous month. Payrolls are seen falling 100,000 overall, though private jobs were expected to rise around 41,000 with the unemployment rate at 9.6 per cent.
Traders said the Aussie currency had been hit by selling from a local bank and by Japanese investors against the yen.
The Aussie eased back to 76.41 yen after running into offers at 77.00 yen.
Against the New Zealand dollar, the Australian dollar was $NZ1.2710, a shade above late Thursday levels.
Strong domestic fundamentals should offer the Aussie some support, with data out this week showing Australia grew at the fastest pace in three years last quarter.
The Reserve Bank of Australia (RBA) holds its September policy meeting next week and is considered almost certain to keep rates at 4.5 per cent for a fourth month.
Yet analysts suspect it will have to resume tightening again in coming months given the economy has considerable momentum amid a boom in mining investment.
Reuters