SYDNEY (Dow Jones)--The Australian dollar was stronger in late Asian trade Thursday as comments from the Chinese central bank offset earlier gains made after surprisingly robust domestic jobs data.Analysts said the currency is likely to be well bid as European trade gathers pace but will likely face strong selling on any rallies into the US$0.8500 level.Market participants are awaiting the Reserve Bank of Australia's August quarterly statement on monetary policy and U.S. Department of Labor's July non-farm payrolls, both due Friday.At 0600 GMT, the Australian dollar was quoted at US$0.8436, up from US$0.8423 late Wednesday. Against the Japanese yen, it was quoted at Y80.255, up from Y79.955.JPMorgan Chief Foreign Exchange Dealer Philip Burke said that while direction for the Australian dollar has been mixed in the local session, European traders are likely to latch onto the buoyant employment data and take the currency back up to recent peaks."I would be surprised if we break out onto an US$0.85 handle tonight...but a strong payrolls number should see us up through US$0.85 if we haven't already reached it," Burke said.Burke said the US$0.8475 level has provided some firm resistance for the currency and is likely to continue to do so until a fresh catalyst pushes it higher.Also providing some caps for high-yield currencies is euro selling by Asian sovereign entities around the US$1.445 level.ANZ Senior Currency Strategist Katie Dean said the Australian dollar is unlikely to breach recent peaks ahead of the RBA data or payrolls."The market doesn't want to get itself too long going into the RBA tomorrow, so we would expect recent ranges to hold," Dean said.Jobs numbers earlier Thursday pushed the currency up to an intraday peak of US$0.8460, although rallies up this level have been fairly well sold into.Data from the Australian Bureau of Statistics showed 32,200 new jobs were created in July, sharply raising the possibility that the central bank will increase interest rates before the end of the year.The unemployment rate remained steady at 5.8%.The labor market expansion is the largest monthly rise since June 2008, defied expectations of a loss of 20,000 jobs and affirms the RBA's decision Tuesday to shift to a neutral policy bias.However, comments from the People's Bank of China - that while it will maintain its moderately loose monetary policy amid concerns over the sustainability of its economic recovery, it will fine-tune its policies as needed - sent the currency down to US$0.8403. The Aussie has since clawed back most of these losses.The market focus on the RBA statement Friday will zero in on the extent of the central bank's inflation and gross domestic product growth forecasts.Already, market participants are pricing in 39 basis points of interest rate hikes by December and 23 basis points by November.Bond futures weakened on the back of the employment figures but have held around recent lows.September three-year bond futures were eight ticks lower at 94.85 while 10-year futures were 5.5 ticks weaker at 94.345.JPMorgan Senior Interest Rates Strategist Sally Auld said that while the RBA has shifted to a neutral policy, the selloff at the short end of the bond curve may be overdone.She said while "strategically, the market remains in a bearish trend...tactically, we note the possibility for a reasonably significant short squeeze."Auld suggests investors look to buy the three-year contract at 94.87 and target moves to 95.20 with stops at 94.77.
