The Australian dollar has slipped against a strengthening greenback amid a better outlook for the US economy.

At 1200 AEDT on Friday, the local unit was trading at 88.90 US cents, down from 89.14 cents on Tuesday, before the Christmas break.

Data released overnight 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 is 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.”

Meanwhile, the Australian bond market was weaker at noon.

At 1200 AEST on Friday, the March 2014 10-year bond futures contract was trading at 95.775 (implying a yield of 4.225 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 96.970 (3.030 per cent), down from 97.000 (3.000 per cent).