The Australian dollar has closed higher, climbing above 103.5 US cents as a positive day on equity markets supported the currency.
At 1700 AEST on Tuesday, the Australian dollar was trading at 103.58 US cents, up half a cent from Monday's local close of 103.24 US cents.
Rochford Capital senior consultant Derek Mumford said the Australian dollar's rally was led by gains on the local stock market, with the S&P/ASX200 soaring 1.3 per cent.
"Risk appetite, particularly when viewed from an equity market perspective, is quite high and the Aussie seems to be benefitting from it," Mr Mumford said.
Mr Mumford said the currency could be in for a volatile time in the days ahead, given the upcoming meetings of the US Federal Open Market Committee and European Central Bank.
The US non-farm payrolls report - a key employment indicator - is also due on Friday night (AEST).
Looking further ahead, Mr Mumford cautioned that the recent rally in global stock markets may struggle to be sustained because of ongoing worries about the health of some of the major developed economies.
And that could put pressure on the Australian dollar.
"I don't really believe the global economy is that strong to justify equity markets being up around new highs," Mr Mumford said.
"I do think it will all come home to roost at some stage."
At 1700 AEST, the Australian dollar was at 101.32 Japanese yen, up from Monday's local close of 100.99 yen.
The local currency was at 79.19 euro cents, up from 79.03 euro cents previously.
Meanwhile, the Australian bond market closed firmer.
The June 10-year bond futures contract ended the local session at 96.910 (implying a yield of 3.090 per cent), up from Monday's local close of 96.900 (3.100 per cent).
The June three-year bond futures contract was at 97.450 (2.550 per cent), up from 97.440 (2.560 per cent) previously.
Australian bonds opened weaker after moving in line with a selloff on US Treasuries during overnight trading.
However, bonds fell back into favour during the local trading day to not only recover lost ground but finish firmer.
ANZ head of interest rate research Tony Morriss said investors continued to find local bonds an attractive investment given Australia's relatively high interest rates compared with many of its global peers.
"We are in a world of very low policy settings with a lot of liquidity," Mr Morriss said.
"We'd expect over time ongoing interest from overseas investors to target our relatively high yields in a world of policy remaining accommodative and excess liquidity."
The Reserve Bank of Australia's cash rate sits at three per cent, compared with 0.75 per cent in Europe and zero in the United States and Japan.
Mr Morriss noted that interest rates on longer-dated Australian bonds were also relatively higher compared with overseas government debt.