The Australian dollar is slightly higher but failed to gain much ground because of nervousness ahead of the release of Chinese manufacturing figures.
At 1700 AEDT on Friday, the local unit was trading at 89.56 US cents, up from 89.42 cents on Thursday.
The currency rallied around midday after new economic data showed Japan's factory output rose at its strongest pace in over two year.
However, Japan's inflation rose to a five year high of 1.2 per cent in the 12 months to January, meaning that its central bank may have to scale back its policies to stimulate the economy.
China will on Saturday release official Purchasing Managers' Index (PMI) manufacturing figures for February.
ThinkForex senior markets analyst Matt Simpson said expectations of a weak outcome is weighing on market confidence.
He said a third consecutive decline in activity is on the cards.
"Following on from HSBC Flash PMI last week we now have the 'official' Manufacturing PMI for China tomorrow.
"Taking into account the two tend to track very closely in terms of trend and the disappointing release from flash PMI last week, the market consensus is for a third consecutive decline in tomorrow's Official PMI whilst the markets are closed for the weekend," he said.
Mr Simpson said a weak number would see the Australian dollar sold off against the Swiss Franc, Japanese Yen, and the euro.
"The Australian dollar which is struggling to hold above 90 US cents would target 88.80 US cents and 88.20 US cents next week, with next target becoming 88.66 US cents and beyond if the bearish trend accelerates," he said.