The Australian dollar climbed on Friday after better than expected Chinese manufacturing data countered concerns about the global outlook and augured well for demand for Australia's resource exports.

At midday AEST, the local unit was trading at 96.95 US cents, an improvement from Thursday's local finish of 96.82 US cents, and not far from a two-year high of $0.9734 struck overnight. It is up 1 per cent for the week and 8 per cent for September.

The Australian currency was well supported by surprisingly strong data out of China, indicating a rise in the official purchasing managers' index to 53.8 in September from 51.7 in August.

The data, which made August the 19th straight month that the official PMI has stood above the 50 mark that separates expansion from contraction, suggests that the Asian superpower will need to keep importing Australia's resource products to support manufacturing.

4Cast head of research Ray Attrill said this would add to expectations that the Reserve Bank of Australia will increase the cash rate at its policy meeting on Tuesday.

According to him, the Aussie is reacting to the increased likelihood of the RBA pulling the trigger next week.

The upbeat data from China came shortly after an Australian survey found activity in the manufacturing sector had contracted in September.

According to Mr Attrill, the RBA will be putting more weight on the Chinese figures as they prepare for their meeting next week.

He said the Australian PMI are relatively minor in the scheme of things when the central bank is taking a very much forward looking view of how much confidence it has in its 2011 growth outlook.

Mr Attrill expects the currency to reach its overnight high of 97.32 during Friday's local session.

With Reuters