The Australian dollar has risen back above 105 US cents after American politicians agreed to a last minute deal to avert the fiscal cliff.
The local currency was the best performer overnight, adding around 0.9 per cent against the greenback.
National Australia Bank's co-head of foreign exchange strategy, Ray Atrill, says the fiscal cliff deal encouraged investors to take money out of the US and pour it into perceived risky assets, such as the Australian dollar.
"With the fiscal cliff not so much avoided, but no crash landing off the cliff, that's obviously sparked a big increase in risk appetite," he observed.
"A lot of money is effectively flowing from centres with low interest rates and [that] are perceived as relatively safe haven, [which] is seeing other markets and other currencies being the beneficiaries." However, while the Australian dollar has received a boost from yesterday's last minute deal, some analysts say it is likely to be short-lived.
BT Financial Group's chief economist Chris Caton says, aside from the possibility of more problems surrounding the US debt ceiling over the next couple of months, the Australian dollar should start falling as mining investment declines.
"I have been spectacularly wrong in forecasting the currency in the past, so my credibility is not great, but I cannot envisage a world in which the mining capex [capital expenditure] boom ends and the Australian dollar remains super-strong," he wrote in a note.
"The currency should lose at least 10 cents over 2013." Mr Caton says such a fall in the Aussie dollar would provide a strong boost to competitiveness and profitability for Australia's export exposed industries.