The Australian dollar opened 2.78 US cents stronger as global attempts to guarantee banking systems lifted investor confidence to buy shares and high-yielding currencies.
At 0700 AEDT, the Australian dollar was trading at $US0.6949/56, up from Monday's close of $US0.6672/77.
Overnight, the local currency traded between $US0.6570 and $US0.6919.
It has appreciated 4.16 per cent since Monday's local close.
Commonwealth Bank manager of institutional service foreign exchange Tim Kelleher said government efforts to ensure the safety of bank deposits and funding, here and abroad, had boosted demand for the Australian dollar.
On Sunday, the federal government guaranteed Australia's $700 billion bank deposits for the next three years.
"It is just a relief rally at the moment," Mr Kelleher said from Auckland.
"It has purely come about because the government has come out and guaranteed the deposits and wholesale funding, as well."
Mr Kelleher said overseas markets and high-yielding currencies had been boosted from renewed confidence after the US and European governments announced more details in guaranteeing their financial sectors.
Wall Street rebounded with its biggest single day rise. The Dow Jones Industrial Average ended up 11.08 per cent and the S&P 500 index rising 11.58 per cent.
European bourses surged, with the French CAC surging index 11.2 per cent, the German Dax index climbing 11.4 per cent, and London's FTSE 1000 index ending 8.26 per cent higher.
The sharp fall in the price of gold from Friday was a sign for a rebound in high-yielding currencies, Mr Kelleher said.
Since Friday's local close, the spot price of gold has slumped more than nine per cent, to be trading at $US829.45 per fine ounce at 0716 AEDT.
"People buy it as a safe haven," he said.
"You see the price of gold coming off, people start buying the currencies again."
Today's only local data is the NAB monthly business survey.
Mr Kelleher expected the Australian dollar to trade today between $US0.6800-0.7000.
He noted caution, however, about the prospects for the Australian dollar, linked to global economic growth and commodity prices.
The CRB index of 19 commodities has fallen around 36 per cent since its peak in mid-July, the same time as the Australian dollar hits post-float high of 98.49 US cents.
"If the commodity crisis does not recover, the Australian dollar will continue to struggle," he said.
"That won't be today.
"That will be three or four days down the track."
