The Australian dollar closed 1.2 per cent firmer on Monday as the US government's pledge to guarantee the assets of troubled banking giant Citigroup helped risk-driven currencies.
At 1700 AEDT, the Australian dollar was trading at 62.87 US cents, up from Friday's close of 62.14 US cents.
The domestic currency had opened the local session firmer, hitting a four-day high of 63.84 US cents by mid-morning, as traders reacted positively to US president-elected Barack Obama's naming of Federal Reserve Bank of New York president Timothy Geithner as the next Treasury Secretary.
The Australian dollar lost ground in the early afternoon, falling to a daily low of 62.33 US cents at lunchtime, as traders waited to see if the US government would rescue Citigroup.
Then Asian stock markets, and high-yielding currencies like the Australian dollar, recovered after the US Treasury announced it would guarantee $US306 billion ($A482.31 billion) worth of troubled Citigroup assets against "the possibility of unusually large losses".
The US Treasury also said it would inject $US20 billion ($A31.52 billion) from its $US700 billion ($A1.1 trillion) troubled asset relief program in exchange for preferred stock.
A senior currency analyst with financial markets research group Forecast, Lee Wai Tuck, said news of the Citigroup rescue boosted the Australian dollar as a rally on Asian share markets encouraged traders to sell the lower-risk Japanese yen for high-yielding money.
"The Asian stock markets, excluding China, have come off their lows.
"We saw some Aussie buying against the (US) dollar and the yen."
At the close of trade, the Australian dollar was at 60.01 Japanese yen, up from Friday's close of 58.87 yen, and at 49.80 euro cents, up from Friday's close of 49.65 euro cents.
The euro finished at 1.2627 US dollars, up from Friday's close of 1.2515 US dollars and at 120.53 Japanese yen, up from 118.57 yen.
The US dollar closed the local session at 95.45 Japanese yen, up from 94.75 yen.
