The Australian dollar is trading close to its three-month highs but it looks as if it is running out of steam after a week-long rally.
Easy Forex currency dealer Anthony Botros said the local currency eased slightly in afternoon trade, but is still in a strong position.
It's possibly a little bit overextended at the moment, and is taking a breather for the time being even though market sentiment remains positive," Mr Botros said.
At 1700 AEST the Australian dollar was trading at 104.09 US cents, up from Thursday's close of 103.93.
It is also continuing to trading close to all-time highs against the euro and finished the local session at 84.90 euro cents, up from 84.58 euro cents previously.
"It's hard to bet against a downturn for the euro against the Aussie at the moment, it's a great time to travel to Europe," Mr Botros said.
At 1700 AEST, the Australian dollar was at 81.80 Japanese yen, up from Thursday's close of 81.69 yen.
Mr Botros said investors are awaiting an expected weekend announcement that China will cut its reserve ratio requirement to free up more money for banks to lend and thus stimulate the economy of Australia's largest trading partner.
Meanwhile, Australian bond futures prices were slightly higher.
At 1630 AEST on Friday, the September 10-year bond futures contract was trading at 97.180 (implying a yield of 2.820 per cent), up from 97.170 (2.830 per cent) on Thursday.
The September three-year bond futures contract was at 97.760 (2.240 per cent), up from 97.750 (2.250 per cent).
ANZ senior rates strategist Tony Morriss said the Australian bond market was well supported as traders move to safer bond markets away from ones with debt-laden governments, such as Spain.
"We've seen a bit of currency strength, which has been a positive, we've seen overseas (bond) markets stay relatively strong despite a little bit of a better bias to stock markets," Mr Morriss said.
"I think there is an underlying demand for core bond markets, particularly as you've seen Spanish bond yields rise back above seven per cent."
Mr Morriss expects there to still be solid demand for Australian bond products as traders play it safe ahead of Wednesday's inflation figure which is expected to post a relatively weak annual rate of 1.3 per cent.
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