At 5pm Canberra times, the Australian dollar was trading at US83.30, up US2c from Friday's close of US81.15.

It was the biggest one-day gain since September 19 last year, when the Australian dollar gained US2.43c to finish at US85.47.

The 2007 rise was the biggest single-session improvement since the currency was floated in December 1983, according to Reserve Bank of Australia data.

The Australian dollar surged by one-fifth of a US cent minutes before the local session finished, to finish above US83c for the first time in two weeks.

Demand for high-yielding currencies, such as the Australian dollar, improved over the weekend after US Treasury Secretary Henry Paulson announced a plan to buy up to $US700 billion of bad mortgage assets from US financial institutions to shore up the American economy.

Westpac currency strategist Jonathan Cavenagh said the Australian dollar performed strongly on Friday night after the announcement of the US Government plan, which Congress is yet to approve.

''The Aussie dollar performed very strongly through the course of the Friday session after we got more confirmation this package was likely to come to fruition,'' he said.

The Australian dollar reached a daily high of US84.03c after 7.30am yesterday, but fell to its low of US82.85 about an hour later as US House of Representatives Speaker Nancy Pelosi said Congress would not give Wall Street a blank cheque.

''We will not simply hand over a $700 billion blank cheque to Wall Street and hope for a better outcome,'' she said.

Ms Pelosi, a Democrat, said the Bill proposed by Republican US President George W.Bush needed to include more independent oversight, protection for home owners and restraints on excessive executive pay-outs.

Wall Street rallied on Friday night on the news, with the Dow Jones Industrial Average rising by 3.35 per cent.

The Australian sharemarket closed 4.5 per cent higher yesterday as investors reacted positively to the US Government's bail-out proposal.

The Australian bond market closed weaker after as the US Government plan boosted equity market confidence.

At 4.30 Canberra time, the yield on the Commonwealth Government March 2019 bond was at 5.838 per cent, up from Friday's close of 5.568per cent. AAP