The Australian dollar has slipped against a strengthening greenback as recent economic data points to a better outlook for the American economy.

At 1700 AEDT on Friday, the local unit was trading at 89.06 US cents, down from 89.14 cents on Tuesday, before the Christmas break.

Economic data released in the US showed the number of Americans applying for unemployment benefits fell 42,000 last week, the biggest drop since November 2012.

Westpac chief currency strategist Robert Rennie said more talk about tapering of economic stimulus in the US was driving the US dollar higher.

He added that there had been a raft of good economic data over the past month or so in the US, showing improvement in employment conditions and consumer and business confidence.

“The US economy does feel as if it’s finishing 2013 on a high,” he said.

“The US dollar should continue to benefit from the data.

“With the decision in December to start tapering the US dollar is going to finish 2013 with some momentum and obviously that hurts the Australian dollar.”

Mr Rennie expects trading volumes to be low over the next few days and that will also mean that movements in values will be volatile.

At 1700 AEDT, the Australian dollar was at 93.31 Japanese yen, up from Tuesday’s close of 92.86 yen, and at 64.82 euro cents, down from 65.14 euro cents.

Meanwhile Australian bond futures prices were lower, also weighed down by further signs of a stronger US economy.

National Australia Bank global co-head of foreign exchange strategy Ray Attrill said the data shows that the US economy is recovering, lessening the need for the Federal Reserve to maintain its massive bond purchase program.

At 1630 AEDT on Friday, the March 2014 10-year bond futures contract was trading at 95.770 (implying a yield of 4.230 per cent), down from 95.805 (4.195 per cent) on Tuesday, before the Christmas break.

The March 2014 three-year bond futures contract was at 96.960 (3.040 per cent), down from 97.000 (3.000 per cent).