The Australian dollar was six per cent firmer at noon as a record points gain on Wall Street sparked a flurry of demand for high-yielding currencies.
At 1200 AEDT, the Australian dollar was trading at $US0.7067/71, up almost four US cents from yesterday's close of $US0.6672/77.
Since the session open, the local currency has traded between an early morning low of $US0.6953 and a late morning high of $US0.7120, the Australian dollar's strongest showing since October 9.
The Australian dollar rose above $US0.7000 at 0930 AEDT, a level last reached on Thursday night, and surged above 0.7100 after 1100 AEDT following an historically strong session on the New York Stock Exchange, which spurred demand for high interest currencies.
A record 936-point rally on the Dow Jones Industrial Average caused the US dollar to weaken against all the major currencies, except the low-yielding Japanese yen.
"That record 900-point gain spurred confidence among investors," CMC Markets foreign exchange dealer Tim Waterer said.
"We saw funds flow out of the Japanese yen to high-yielders like the Aussie.
"There's a feeling the Australian dollar has been oversold: the rebound was not surprising given the Dow Jones result."
Against the low-yielding Japanese yen, the Australian dollar rose above 73 yen during morning trade for the first time since October 7, marking a nine per cent gain since yesterday's close.
The Dow Jones index posted an 11.08 per cent rally overnight to finish at 9,387.61 points, the biggest percentage point jump since March 1933, during the early days of Franklin Roosevelt's Depression-era US presidency.
Mr Waterer said US Treasury Secretary Henry Paulson's meeting with the chief executives of major banks, and the coordinated response of world governments to tackle the financial crisis, had buoyed investor confidence.
"The market likes the fact they're taking steps and being pro-active," he said.
"The Aussie is a confidence currency."
On a day of thin trading volumes, Mr Waterer said the Australian dollar could test $US0.7200 today if traders in Europe maintained the momentum for high-yielding currencies.
"The Aussie could follow the euro higher when European markets open," he said.
