THE Australian dollar closed 1.6 US cents higher as growth assets rallied following an easing in investor concerns about the European debt crisis.
At 5pm (AEST) today, the Australian dollar was trading at $US0.8514/ up 1.89 per cent from yesterday's close of $US0.8356.
Since 7am (AEST) today, the local unit traded between $US0.8464 and $US0.8535.
Equity markets rallied after China denied a report in the Financial Times that the world's largest holder of foreign exchange reserves was considering reducing its investment in euro zone bonds yesterday.
Wall Street ended higher, with the Dow Jones industrial average closing up 2.85 per cent overnight.
Equity markets in Asia followed the lead today, with Australia's benchmark S&P/ASX200 index closing up 1.79 per cent, while Japan's Nikkei-225 index ended 1.28 per cent higher.
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RBC Capital Markets senior currency strategist Sue Trinh said the local dollar, along with other high-risk assets, received a boost following the Chinese denial.
"That helped drag the euro higher," Ms Trinh said from Hong Kong.
"We had pretty much a one-way rally in US equities.
"it was all pretty a one-way directional rally last night that really emboldened the bulls and helped the Aussie."
Ms Trinh said the Australian dollar was well supported during today's Asian session.
"It has been well bid today," she said.
"It is much higher than it was 24 hours ago as US stocks are pretty much sitting at the highs of the week."
Economic events due in the US during today's offshore session (AEST) include personal spending for April and the University of Michigan confidence index for May.
Ms Trinh forecast the Australian dollar to trade between $US0.8420 and $US0.8600 during today's offshore session, with equity markets to provide the direction for currencies.
Dow builds on its gainsDollar close to three-month high
