KEY POINTS:
The Australian dollar surged above 90 US cents to reach its highest point in 23 years today before retreating slightly before the local market opened.
The Aussie climbed to 90.06 US cents in overnight trade - its highest level since June 12, 1984 - amid further weakness in the US dollar.
When the Australian foreign exchange market opened formally this morning, the A$ was at US89.93.
Bank of New Zealand currency strategist Danica Hampton said the Australian dollar had been buoyed by a surge in risk appetite following the release of a report in the US on Friday that suggested the US economy was in better shape than previously thought.
The US Labor Department reported that employers boosted payrolls by 110,000 in September and said the US economy actually added 89,000 jobs in August instead of the earlier-reported 4,000 job losses.
Despite the gain, the US unemployment rate rose to 4.7 per cent.
"The payroll report suggested the US economy has held up better than people expected, so investors have scaled back their expectations of an easing in monetary policy by the US Federal Reserve," Ms Hampton said.
"The stronger than expected payroll data report suggests a US recession is less likely.
"This has really buoyed investor sentiment and we've seen a rebound in risk appetite.
"So there's really strong demand for carry trade currencies. That's the main factor that boosted the Aussie through that 90 US cents level."
Carry trade is when investors sell low-yielding, or low interest rate currencies such as the US dollar, and buy high-yielding currencies such as the Australian and New Zealand dollar.
"I guess the Australian dollar has really outperformed in the sense that the Australian economic outlook is so bright: not only does (economic) growth look like it's improving, but there's also a risk that the Reserve Bank might tighten rates again."
"That domestic outlook is underpinned by the fact global growth is hanging together relatively robustly, which will support commodity prices.
"It all looks like a positive picture for the Australian dollar."
- AAP
