At 12.00pm AEDT, the dollar was trading at $US0.7097/02, up from Thursday's close of $US0.7058/62.
During the morning, the local currency moved between a low $US0.7090 and a high of $US0.7134.
The dollar opened stronger at $US0.7094/97 at 07.00am AEDT after the US dollar was sold off during New York trading ahead of the release of data on US non-farm payrolls for December.
Barclays Capital currency strategist David Forrester said the market also greeted positively the announcement Citi would support legislation to allow bankruptcy courts to reset mortgage loans in a bid to keep people in their homes.
"It saw a little bit of risk being put back on the table and that also helped the Aussie dollar,'' Mr Forrester said from Singapore.
The dollar continued to trade higher at the start of the local trading day and touched $US0.7134 at about 08.00am AEDT, before drifting back towards $US0.7100.
Mr Forrester said investors were staying on the sidelines and waiting for the US payroll data.
"I think ahead of non-farm payrolls people will be taking risk off the table and that will most likely mean a lower Aussie dollar into the number,'' Mr Forrester said.
The payrolls data is tipped to show the US economy shed another half a million jobs in December, on top of the 533,000 jobs cut in November.
If the data is better than expected, the US dollar will rally, said Mr Forrester. The Australian dollar could then get a boost from an improved risk environment.
"A downside surprise would likely see, initially, US dollar selling and perhaps a spike higher in the Aussie but for a short,'' Mr Forrester said.
"Then I think risk aversion on a downside surprise would spike and that would bring cyclical currencies such as the Aussie dollar lower.''
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