Australian Dollar Becalmed as US Jobs Data Dominates

The Australian dollar nudged higher Friday with traders largely sidelined ahead of U.S. employment data which is likely to shape thoughts on the pace at which the U.S. central bank reins in its economic stimulus.

At 0450 GMT the currency was around US$0.8903–up from Thursday’s US$0.8878. Support is said to be at US$0.8850.

“It was a typically muted session in Asia ahead of non-farm-payrolls,” said Sue Trinh, currency strategist at RBC Capital Markets.

All eyes are on the U.S. jobs data to be released at 1330 GMT. A Wall Street Journal poll of economists suggests the data will show the U.S. added 191,000 jobs in December.

“We think the expectation of our U.S. team is at the upper end of the expected range. As such, if realised, the impact on markets could be material,” Deutsche Bank said in a note to clients.

The employment report will be a key input to any future chat at the U.S. Federal Reserve about the speed at which it reduces its bond buying program. In December the Fed announced it would cut monthly bond purchases by $10 billion to $75 billion starting January.

Markets are typically very quiet ahead of U.S. payroll data and relatively busy afterwards, said Emma Lawson, currency strategist at National Australia Bank.

“This is particularly true at present, given the strong emphasis the U.S. FOMC has on the labor market, as they look to continue with their taper of quantitative easing,” Ms. Lawson said.

Next week will see data released on Australia’s job market. Any rise in the unemployment rate will feed suggestions the Reserve Bank of Australia has scope to lower interest rates further.

With its benchmark cash rate already at a record low 2.50%, the RBA has signaled it is would be reluctant to cut further. Still, RBA Governor Glen Stevens said in December the door is still open to a further cut if economic circumstances warrant it.

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