Dollar capped by oil’s fall

A strong greenback and lower oil price has held the local unit close to US77.5c.

A decline in oil prices and a strong greenback have kept the Australian dollar well below US78 cents in late afternoon trade.

At 6.15pm AEST on Friday, the currency was trading at US77.57c, up slightly from US77.39 cents on Thursday.

But the unit had drifted slightly from its noon price of US77.65c as traders eyed the oil market.

Oil’s fall was driven by nervous traders taking profits as prices approached $US45 a barrel, which increased the likelihood shale oil producers would ramp up output, OANDA Australia and Asia Pacific senior trader Stephen Innes said.

The International Energy Agency’s comments that non-OPEC production would fall this year by the most in a generation also weighed on crude prices.

But it wasn’t only oil pushing the Australian dollar lower.

BK Asset Management managing director of FX strategy Kathy Lien said an official report released on Thursday showed US jobless claims were at their lowest level since 1973.

The surprisingly strong data gave the greenback a significant boost against commodity currencies like the Aussie.

“Coupled with shifting sentiment from the oil price, the Aussie dollar sold off in convincing fashion at the open of trade this morning,” he said.

At 5pm AEST, the local currency was at 85.66 Japanese yen, up from 85.62 yen on Thursday, and at 68.67 euro cents, down from 69.13 euro cents.

The market’s focus is now turning to next week’s busy central bank calendar, with the US Federal Reserve, the Reserve Bank of New Zealand and the Bank of Japan to decide on interest rates.

Bond prices also fell.

At 4.30pm AEST on Friday, the June 2016 10-year bond futures contract was trading at 97.365 (implying a yield of 2.635) down from 97.405 (2.595 per cent) on Thursday.

The June 2016 three-year bond futures contract was at 97.970 (2.03 per cent) down from 98.000 (2.000 per cent).

AAP