The Australian dollar found support below the 0.86 level against the US dollar on Monday with a limited initial recovery in Europe and then secured renewed gains on Tuesday.

There was a recovery in risk appetite and commodity prices which helped underpin sentiment while the US currency was also put back on the defensive as underlying sentiment towards the US currency remained negative.

The Australian currency pushed to a high just above 0.8750 against the US currency in Europe. There will continue to be firm near-term Australian buying support on retreats, but the net risks still make the currency unattractive at current levels given the amount of international recovery priced in to high-yield currencies.