The Australian dollar has opened higher, climbing back above $US0.8700 as oil prices rose and the US dollar weakened.
At 0700 AEST, the Australian dollar was trading at $US0.8718/22, up from yesterday's close of 0.8642/45.
During the overnight session, the local currency traded between a low of $US0.8635 and a high of 0.8735.
The US dollar lost ground against most currencies overnight, after a poor day on US equities and higher oil prices.
Lehman Brothers FX strategist Steve Englander said the Australian dollar and euro were among the best performers against the US dollar, albeit on a quiet day with low volumes.
"By the end of the session, commodities have given up about half their gains, whereas the euro and Aussie are still trading close to their highs," Mr Englander said from New York.
Crude oil for September delivery gained $US1.66 to settle at $US114.53 a barrel on the New York Mercantile Exchange.
Further concerns on financial markets and a higher-than-expected increase in US producer prices in July pushed Wall Street lower, with the US stock market down about one per cent.
Mr Englander said the US dollar had been appreciating "almost non-stop" for close to a month, leaving it open to a bit of a pull back.
"We're still bullish on the US dollar, but having gone up so rapidly and so much in advance of what interest rate differentials are doing, there comes a point where market dynamics suggest that there could be some vulnerability," Mr Englander said.
"It's only to be expected."
Mr Englander said he expected the Australian dollar to be at $US0.8500 by the end of the year, before declining further to $US0.8100 by the end of March 2009.
"The story that we have is ongoing pressure on global economies, ongoing pressure on commodities and ongoing pressure on commodity currencies," Mr Englander said.
"It doesn't add up to a very positive Aussie dollar picture."
The Department of Education, Employment and Workplace Relations will release its skilled vacancies survey for August.
Also on the local data calendar today is the Westpac-Melbourne Institute leading index of economic activity.
