At 12.00pm (AEDT), the dollar was trading at $US0.8722/23, up from Friday's close of $US0.8689/93.
During the domestic session the local unit traded between a low of $US0.8647 and a high of $0.8726, according to IRESS data.
IG markets research analyst Ben Potter said anticipation had mounted over the weekend that the Reserve Bank of Australia would raise interest rates above their current 3 per cent when the board of governors meets tomorrow.
If the RBA does lift the cash rate, it would be the first rate rise since March 2008 and would make Australia the first G20 nation to do so.
"Obviously, it's very interesting ahead of what's happening tomorrow,'' Mr Potter said.
"There's lingering speculation that they're going to raise rates tomorrow.
''(That and) a thin market has seen the Aussie bid higher.
The central bank rapidly cut rates to current levels in a series of moves between September last year and April in an effort to help the economy withstand with the global financial crisis.
A run of better than expected economic data in recent months has seen the debt futures market waver between a definite and possible rate rise in October.
At the moment, it has priced in a 40 per cent chance of a 25 basis point rise tomorrow.
It also has fully priced in a 50 basis point lift in over November and December.
The higher the overnight cash rate, the more attractive the local unit is to currency traders. Australia already has one of the highest interest rates of developed countries.
Mr Potter said he doesn't expect the Reserve Bank to raise rates before Christmas.
"If they're going to do it at all, it's most likely November or December,'' he said.
"We just can't understand why they'd even bother looking at it before Christmas.
"The Christmas retail period is one of the important ones, but it wouldn't be more important than this year.
"On a pros and cons basis, I can't think of any reason to raise now.''
Meanwhile, a private sector survey released today showed the number of jobs advertised in newspapers and on the internet rose 4.4 per cent in September.
It was the ANZ Job Ads series' strongest pace of increase since December 2007 and followed a 4.1 per cent improvement in August.
Mr Potter declined to make a prediction for the Australian Unit for the rest of the domestic session.
With the Labour Day public holiday in NSW and the ACT, he expected trade to remain thin.
The Reserve Bank (RBA) has not calculated its trade weighted index (TWI). The TWI closed on Friday at 67.4.
Meanwhile, the bond market was almost flat. The yield on the Commonwealth Government March 2019 bond was at 5.102 per cent, almost flat with Friday's close of 5.103 per cent, while the yield on the April 2012 bond was at 4.616 per cent, flat with its previous close.
On the Sydney Futures Exchange, the December 10-year bond futures contract price was at 94.770, down from Friday's close of 94.825, while the December three-year bond futures contract was at 95.110, down from 95.190 previously.
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