Traders were cautious as the potential for big, unexplained orders was high due to Japan's March fiscal year end.
Expectations of an interest rate cut by the RBA next week have risen steadily in recent days, with traders now pricing in a 50 per cent chance of a cut.
They said recent evidence that the economy has slowed might tempt the RBA to nudge its cash rate lower again.
Scott Haslem, chief economist at UBS, noted that some forward-looking indicators of the economy point to a slowdown.
"These handful of indicators have caught our attention, and increase the risk that the economy may need a little more 'monetary' help," he said
The RBA cut interest rates in late 2011, but has since left them on hold. The cash rate target now stands at 4.25%.
David Scutt, a trader at Arab Bank, said the market is also awaiting Chinese production data on Sunday, amid rising concerns that growth is slowing quickly in the world's second-largest economy.
"Even if the China PMI comes out slightly better-than-expected, it is already clear that they're slowing down," Scutt said.
China is Australia's biggest trading partner and the Australian dollar is often seen as a proxy for the Chinese economy.
"Next week is shaping up as pivotal in terms of what mindset the market has over the next quarter, with key data due for release around the globe," said Tim Waterer, trader at CMC Markets.
"The Australian dollar has been under intense scrutiny this week given the uncertainty surrounding future Chinese growth and implied demand for key commodities," he said.
Sean Callow, currency strategist at Westpac, said rallies in the Australian dollar have proven fragile this week.
He expects the RBA to adopt a clearly dovish tone at its policy meeting Tuesday.
"The RBA is likely to strike a more noticeably dovish tone on Tuesday, with any relief rally on a steady cash rate likely to be short-lived," Callow said.
At 0555 GMT, the Australian dollar was trading at US$1.0394, up from US$1.0372 late Thursday. The Aussie was at Y85.26, down from Y85.7525.
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