The Australian dollar is lower after the release of some good US employment data.

At 0700 AEDT on Friday, the local unit was trading at 88.91 US cents, down from 89.14 cents on Tuesday, before the Christmas break.

The number of Americans applying for unemployment benefits fell 42,000 last week, the biggest drop since November 2012.

OM Financial senior client adviser Stuart Ive said the data helped the US dollar rally against the Japanese yen on expectations the US Federal Reserve will scale back its economic stimulus program throughout 2014.

After its December meeting, the Fed said it would reduce its bond purchases by $US10 billion to $US75 billion, starting in January.

The US central back said it would continue to taper the purchases depending on the strength of the US economic recovery.

“The US dollar continues to broadly strengthen on the basis of the improved data and the expectations of further tapering,” Ive said.

“We’ve also seen stockmarket continue to strengthen on the back of improved data from the US.

“Even though jobless claims are a little erratic around Christmas, the data does continue to show improvement.”

Ive expects the Australian dollar to trade in a range between 88.70 US cents and 89.00 cents on Friday.

AAP