The Australian dollar hit an all-time high as the Australian Stock Exchange jumped nearly 5 per cent.
The Australian dollar index was up 2.3 per cent at 76.88 US cents.
The Australian benchmark index was down 1.4 per cent, with the broader Australian dollar gaining 1.1 per cent on the day.
The index had already closed up more than 5 per’th cent before hitting a new high at 76 US cents on Thursday.
Read moreThe move was triggered by the government announcing it would allow the US government to issue bonds that could be traded in the dollar.
In a statement, the Federal Government said it had decided to issue its bonds in US dollars.
“We have decided to start issuing US dollar backed securities to facilitate US dollar trading by our banks,” it said.
The US government is one of Australia’s largest foreign investors, buying $10 billion in shares in the stock market in the past year.
The announcement sparked a sell-off in the Australian dollar.
It was up 3.7 per cent in a day, and the dollar was trading at $US72.30.
The dollar was up more in Sydney, up 3 per cent against the Australian currency.
The currency has gained more than 1 per cent so far this year, as the economy has recovered and the unemployment rate has dropped.