At 12.00pm (AEST), the unit was trading at $US0.7998/03, up from yesterday's close of $US0.7984/87.
During the offshore session, the domestic unit moved between $US0.7959 and $US0.8007.
Royal Bank of Scotland foreign exchange strategist Greg Gibbs said improved outlook for the Australian economy from the International Monetary Fund (IMF) and efforts from European central banks to boost liquidity had boosted investor appetite for riskier assets.
The International Monetary Fund (IMF) yesterday upgraded its growth forecasts for Australia to a contraction of 0.5 per cent in 2009, before growing by 1.5 per cent in 2010. This compared with a previous forecast for a 1.4 per cent contraction this year and 0.6 per cent growth in 2010.
"The IMF statement this morning probably gave it some support,'' Mr Gibbs said.
"Also, the ECB operation overnight in injecting 12-month funds into the banking system and the Swiss central bank's intervention to weaken their currency contributed to a firmer tone for riskier assets.
"That helped offset the negative impact of that may have arisen from the FOMC (US Federal Open Market Committee) statement.''
The FOMC overnight decided to keep US official interest rates where they are, in a range of zero to 0.25 per cent.
Mr Gibbs said investors had gained confidence from the IMF report and had sought to buy higher growth assets such as equities and the dollar.
The Australian All Ordinaries index was 0.70 per cent higher at 12.11pm, while Japan's Nikkei index was up 1.66 per cent.
"That is lending weight to the Aussie dollar recovering a bit today,'' Mr Gibbs said.
With no local economic events to drive the dollar, Mr Gibbs expected the currency to trade between $US0.7950 and $US0.8050 for the rest of the Asian session today.
At 12.00pm, the Reserve Bank's trade weighted index (TWI) was at 64.1, up from yesterday's close of 63.6.
Meanwhile, the bond market was weaker at noon.
The yield on the Commonwealth Government March 2019 bond was 5.653 per cent, up from yesterday's close of 5.613 per cent, while the yield on the April 2012 bond was at 4.695 per cent, up from 4.568 per cent.
On the Sydney Futures Exchange, the September 10-year bond futures contract price was 94.360, down from yesterday's close of 94.395, while the September three-year bond futures contract was at 95.120, down from 95.230.
