The local currency was trading at US73.12c at 5pm, up US72.79c yesterday. Against the yen, the currency rose from around Y89.35 to around Y90.36 during the session.

Traders said weakness in the Australian dollar against the yen over recent weeks might have attracted demand from Japanese life insurers, traditionally big buyers of Australian government bonds.

The yield on Australian 10-year bonds has fallen in recent weeks, indicating fresh demand coming back into the market, said David Plank, debt strategist at Deutsche Bank.

Spot iron ore rose 1.4 per cent yesterday, to $US51.40 a tonne, according to the Steel Index.

Sean Callow, currency strategist at Westpac, said the rise in the iron-ore price might have been a trigger to help lift the currency.

Still, attention is fixed on the outlook for interest rates in the US with this week’s coming Federal Reserve policy meeting.

Mr Callow said all signs pointed to a rise in US interest rates in September, but the US central bank might not want to box itself in so early with a commitment this week.

Meanwhile, a speech by Reserve Bank of Australia Governor Glenn Stevens set for the end of this week will be closely watched, as the RBA’s policy meeting board is scheduled to meet in early August.

While futures markets continue to price in an RBA rate cut, a move isn’t expected until closer to the end of the year.