The Australian dollar sprung back from lows on Monday, with record gold prices and some short-covering activity pushing it higher.
At the local close, the dollar was trading at $US0.9194, up from a low $US0.9113 struck early Monday, to be steady on $US0.9197 seen here Friday.
Gold had zoomed to a record above $US1165 an ounce on Monday and that tends to benefit the Aussie because it is associated with a weak US dollar.
Australia is also the world's fourth-biggest gold miner. Some analysts said the Aussie's rise was also amplified by investors buying the currency to exit short positions entered on Friday.
The Aussie had dropped for four straight days last week, prompting some investors to bet on more near-term weakness by shorting the currency.
Monday's bounce turned those positions into a loss, however, forcing some investors to abandon them.
"The Aussie was a bid right from the open," said Sue Trinh, an analyst at RBC Capital Markets. "With so many short positions left to cover, the Aussie could retest last week's high."
Trinh said Australian fund managers were among the most active buyers. With the Japanese market resuming trade on Tuesday after Monday's market holiday, more investors may be looking to cover their short positions in coming days.
The Aussie had hit a 15-month high of $US0.9407 on November 16, before getting dragged by bouts of profit-taking from investors keen to sell one of the year's best-performing currencies.
Against the yen, the Aussie was steady at 81.66, rebounding from an intra-day low of 80.94 yen.
Aussie bond futures were mixed, compared to general weakness in US Treasuries ahead of a $US118 billion auction of notes this week.
The three-year contract lost 0.01 point at 95.13, and 10-year futures were up 0.025 points at 94.615.
Australian swap yields jumped from multi-week lows as well. One-year swap yields bounced off a five-week low to 4.54 per cent, and two-year swaps rose from a six-week trough to 5.03 per cent.
Three-year swaps edged off a six-week low to 5.34 per cent. Peter Jolly, an analyst at National Australian Bank, said swap rates are looking attractive for borrowers who want to pay fixed rates.
He said short-term swap yields tend to peak early in the local policy tightening cycle.
"The medium of this range would likely be a good medium term level for hedgers," Jolly said, referring to a 5.0-5.4 per cent range for three-year swaps.
The Reserve Bank of Australia has raised interest rates by 25 basis points in both October and November to bring the target cash rate to 3.50 per cent. Investors expect it to raise rates by another 140 basis points in the next one year
