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AAP

2013-01-18

The Australian dollar is higher on news of improved economic growth in China.

At 1700 AEDT on Friday, the currency was at 105.23 US cents, up from Thursday's local close of 105.10 US cents.

The Australian dollar rallied to 105.59 US cents following the release of the Chinese figures, which showed the world's second-largest economy grew by 7.8 per cent in the 12 months to December, up from 7.4 per cent for the year to September.

But Easy Forex currency dealer Tony Darvall said the currency was sold off quickly following the rally.

"It is a dangerous sign for the market that after some good data we saw some selling into the sharp spike," he said.

Mr Darvall said there was no obvious driver for the currency's pullback, but said the market may have run out of steam following recent rallies.

"I think the market has just been caught a little long here," he said.

However, the Australian dollar hit a fresh four-and-a-half-year high of against the Japanese yen.

During intraday trade the currency peaked at a high of 95.04 Japanese yen.

At 1700 AEDT, the Australian dollar was trading at 94.73 yen, up from 93.23 yen on Thursday and at 78.62 euro cents, down from 79.12 euro cents.

Mr Darvall said the Australian dollar could continue selling off over the next few weeks if fell below 105 US cents in the coming days.

Meanwhile, Australian bond futures prices sold off sharply, reversing the rally that followed the release weaker domestic jobs figures on Thursday.

Westpac senior market strategist Damien McColough said bond futures sold off globally on Thursday night and the trend continued during Friday's Asian session.

He said the sell-off was likely to be a reaction to Thursday's rally after Australia's unemployment rate rose to 5.4 per cent in December.

"It's one of those really weak days," he said.

"I think the market just got itself all the one way and now it is kinda stopping out of long positions."

At 1630 AEDT on Friday, the March 10-year bond futures contract was trading at 96.610 (implying a yield of 3.390 per cent), down from Thursday's local close of 96.735 (3.265 per cent).

The March three-year bond futures contract was at 97.190 (2.810 per cent), down from 97.310 (2.690 per cent) previously.

Evan Schwarten