AAP, with a staff reporter
The Australian dollar rose more than one US cent after the release of disappointing US manufacturing figures and gains on Wall Street.
At 0630 AEST on Tuesday, the currency was at 97.50 US cents, up from 96.46 US cents on Monday afternoon.
Westpac New Zealand senior market strategist Imre Speizer said the Australian dollar had benefited from weakness in the greenback following the release of the US manufacturing figures.
The closely-watched ISM manufacturing Index showed the US manufacturing sector in May contracted at the fastest pace in four years.
The data caused a sell-off in the US dollar, which boosted the Australian currency.
Mr Speizer said the figures reduced the likelihood the US Federal Reserve would start to wind back its asset-buying program at its next board meeting, which prompted a selloff in the US dollar.
"That lifted all major currencies against the US dollar," Mr Speizer said.
Mr Speizer said the key local event for the currency on Tuesday would be the Reserve Bank of Australia's monthly interest rate decision, to be announced at 1430 AEST.
The central bank is expected to keep the cash rate on hold at 2.75 per cent so, baring any surprises, Mr Speizer said, the Australian dollar should be able to push above 98 US cents during the session.
Meanwhile, US stock markets recorded gains overnight, which supported demand for risk assets like the Australian dollar.
The Australian dollar fell 7.5 per cent in May, marking its worst monthly performance since September 2011. Much of the May decline was attributed to Chinese economic growth concerns and the RBA's move to cut its key interest rate.