The Australian dollar fell to a one-week low on Thursday after the US currency got a boost from modest economic data that lifted expectations of favourable employment figures on Friday. A fall in regional stock markets also played a part, with investors taking a breather from riskier and higher-yielding assets.
As a result, demand for carry trades, which had taken the Aussie to a 10-week high of 103.79 yen, cooled. The Australian dollar had neared 18-year peaks against the US dollar on Wednesday after strong retail sales data for August revived speculation of an interest rate hike as early as next month.
"The Aussie dollar is caught between strong local fundamentals and squaring up of some US dollar shorts," said Jo Masters, currency strategist at Macquarie Bank.
Forecasts are for 94,000 gain in US jobs in September, bouncing back from the first drop in monthly hiring in four years during August. Data the previous day showed growth in the US labour market, boding well for the payrolls numbers.
The Australian dollar was quoted at $0.8810/15 against the US currency, down 0.8 percent from $0.8881/83 and off a low of $0.8790 which was its lowest since September 28. The Aussie has risen over the past two weeks, scaling 18-year peaks of $0.8950, as credit market worries eased and as investors bet on more rate cuts by the US Federal Reserve.