At 12.00pm (AEST), the dollar was trading at $US0.8585/89, up from yesterday's close of $US0.8574/79.
Since 7.00am, the domestic currency moved between $US0.8583 and $US0.8639.
The dollar started the local session at $US0.8609/11 and reached its intra-day high following a positive lead from US equity markets.
Wall Street rose for a fourth consecutive day on renewed optimism about a recovery from the global recession.
The Dow Jones Industrial Average closed up 0.53 per cent, the tech-heavy Nasdaq composite added 1.11 per cent and the broad-market Standard & Poor's 500 index gained 0.78 per cent.
RBC currency strategist Sue Trinh said the local currency was knocked from its session highs on the back of worse than expected job losses in August.
The labour market report lowered expectations of the Reserve Bank of Australia (RBA) lifting the overnight cash rate next month.
Australia's unemployment rate was a seasonally adjusted 5.8 per cent in August, compared with an unrevised 5.8 per cent in July and June, the Australian Bureau of Statistics said today.
Total employment fell by 27,100 in August, greater than market forecasts for a loss of 15,000 in the month.
"It is highlighting the interest rate market had too much baked in the cake for an October rate hike by the RBA,'' Ms Trinh said.
"Interest rate futures have rallied very sharply, about 20 basis points on the back of that (jobs) number, and follows the very sharp rally following the retail sales and housing finance numbers that were weak yesterday as well.''
"The market has given up on an October rate hike and that has capped the Aussie (dollar).''
Ms Trinh forecasts the dollar to trade between $US0.8560 and $US0.8620 for the rest of the Asian session.
The Reserve Bank of Australia's (RBA) trade weighted index (TWI) was at 67.2, down with yesterday's close of 67.4.
Meanwhile, the bond market was firmer. The yield on the Commonwealth Government March 2019 bond was at 5.386 per cent, where it closed yesterday, while the yield on the April 2012 bond was at 4.665 per cent, down from 4.753 per cent previously.
Trading on debt futures markets was halted on the Sydney Futures Exchange as the computer system went down at around 11.34am.
Figures are from 12.44pm when SYCOM trading returned.
On the Sydney Futures Exchange, the September 10-year bond futures contract price was 94.635, up from yesterday's close of 94.625, while the September three-year bond futures contract was at 95.260, up from 95.155.
Gold eclipses $1,000Dollar shaky on rate hike speculation
