The Australian dollar closed lower after bigger than expected interest rate increases on Friday by two of the four big mortgage lenders prompted traders to ease their expectations about further monetary tightenings by the central bank.
At 1700 AEDT, the Australian dollar was trading at $US0.0.9224/26, down 0.06 per cent from Thursday's close of $US0.9280/83.
During the domestic session, the local unit traded between $US0.9215 and $US0.9253.
Nomura Australia chief economist Stephen Roberts said the local unit dropped after the ANZ and Commonwealth Bank raised their lending rates by more than the Reserve Bank of Australia's (RBA) 25 basis point increase earlier this week.
ANZ lifted its standard variable mortgage rate by 35 basis points to 6.66 per cent, effective from Monday December 7.
Commonwealth Bank said it would increase its standard variable home loan rate by 37 basis points to 6.61 per cent, effective Wednesday, December 9.
"My suspicion is that the rate increase that came through with the Commonwealth Bank and also from the ANZ and that's just switched people's thinking towards maybe a little less in the way of monetary policy tightening, rather than more," Mr Roberts said.
The RBA on Tuesday increased its base cash interest rate by 25 basis points to 3.75 per cent, the third successive monthly increase of the same amount.
Westpac Banking Corporation said on Tuesday, just hours after the RBA decision, that it would increase its standard variable home loan rate by 45 basis points to 6.76 per cent, effective from Friday December 4.
National Australia Bank Ltd on Thursday raised its variable mortgage rate by 25 basis points to 6.49 per cent.
Mr Roberts said he now expected a weaker domestic currency over the next session or two.
"It's a little bit dependent on what happens with the (US November) non-farm payrolls tonight," he said.
"Our view is the non-farm payrolls will come in probably better than the market consensus.
"In those circumstances, there might be a little bit of a reprieve for the Australian dollar on that because what tends to happen is the US paradoxically comes under pressure and tends to come down a little."
Mr Roberts forecast a trading range for the Australian dollar of between a low 92 US cents to mid 92 US cents over the weekend.
