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Aussie dlr off highs, but yield appeal supports

* Aussie pulls back to track gold, stocks lower

* Markers awaiting speech by RBA chief at 0855 GMT

* Bond futures stay in the red

SYDNEY, Nov 5 (Reuters) - The Australian dollar gave up some gains on Thursday hurt by lower gold and stock prices, although the prospect of a widening interest rate advantage helped keep it aloft.

The Aussie retreated to $0.9051, off a high of $0.9145 struck offshore. The decline mirrored a 0.9 percent fall in gold prices and modest losses in stock markets across Asia.

Yet even with the pull-back, the Aussie is still up from Wednesday's $0.9022. Most of its strength came in a rally in New York late Wednesday when the Federal Reserve repeated its commitment to keep U.S. rates near zero for an "extended period".

Traders and analysts said the promise of widening yield differentials in the Aussie's favour was fuelling a feel-good factor about the currency.

"The feeling is that the Aussie is going to be heading north, not south, in the next six months," said Tim Waterer, a trader at CMC Markets.

The local dollar nudged higher on the yen to 81.84 yen , from 81.49 yen.

At 3.50 percent, Australian rates are the highest among major economies. [ID:nGLOBAL]

The Reserve Bank of Australia (RBA) said it was "prudent" to continue raising rates "gradually", after hiking by a quarter of a percentage point earlier this week.

The prospect of local rates rising further has pushed the two-year Australian-U.S. yield spread to a 15-month-high of 396 basis points on Oct. 27. The spread has since narrowed and stood at 317 basis points on Thursday.

Investors are now closely monitoring economic reports and speeches by RBA officials to spot clues about whether the RBA will raise rates again in December, having already done so in the previous two months.

First up is a speech by RBA Governor Glenn Stevens later Thursday, when he will also be taking questions. The central bank also releases its quarterly Statement on Monetary Policy on Friday which is likely to see upward revisions to forecasts for growth and inflation.

December interbank futures <0#YIB:> and implied money market rates show investors are mulling a 58-60 percent chance of a 25-basis-point rate rise next month.

Aussie bond futures stayed in the red after tracking losses in Treasuries earlier, ahead of next week's $81 billion Treasury auction.

Three-year bond futures were down 0.06 points at 94.93. The 10-year contract shed 0.035 points at 94.40. ----------------(Snapshot at 4:00 p.m./0500 GMT)---------------- FUTURES CASH YIELD 90-DAY BILL 90-DAY BILL (DEC) 95.88 (-0.03) AUD3MOIS= 3.62 (3.60) 3-YR BOND (DEC) 94.93 (-0.06) AU3YT=RR 4.96 (4.91) 10-YR BOND (DEC) 94.40 (-0.035) AU10YT=RR 5.65 (5.62) AUD/USD 0.9051 (0.9022) US10YT=RR 3.51 (3.47) --------------------------------------------------------------- AUD VS 2-YR 10-YR *AUD 3-YR/10-YR SPREAD USD +370 (+364) +214 (+215) *FUTURES +0.53 (+0.546) CAD +319 (+316) +217 (+219) *AUD 2-YR/10-YR SPREAD NZD +32 (+28) -10 (-10) *CASH +105 (+106) --------------------------------------------------------------- (Reporting by Koh Gui Qing)

© 2008 Thomson Reuters. All rights reserved.Click for Restrictions

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