The Australian dollar has leapt a quarter of a US cent higher after US Senate leaders reached a last-minute deal that temporarily extends the debt ceiling and will reopen the government.

At 0700 AEDT on Thursday, the local unit was trading at 95.50 US cents, up from 95.25 cents on Wednesday.

Senate Majority Leader Harry Reid and the chamber’s top Republican, Mitch McConnell, have announced an agreement that will reopen the government with a temporary budget until January 15 and extend the US borrowing authority until February 7.

The deal must now be approved by Congress.

“It’s pretty much a done deal,” Westpac chief currency strategist in New York Richard Franulovich said.

“That’s given risk assets a big lift and the Aussie has inevitably bounced on that.

“I see very little to sway the Aussie from trading higher in coming days and weeks.”

AAP