The Australian dollar has jumped to a one-month high on hopes of a resolution to the US political stand-off over the debt ceiling.

At 0700 AEDT on Tuesday, the local unit was trading at 95.01 US cents, up from 94.67 cents on Monday.

The Australian dollar bounced above 95 US cents, to its highest point since September 19, after US Democratic and Republican Senate leaders emerged from negotiations confident they would strike a deal to avert a debt default.

They have three days to come to an agreement on extending the US debt ceiling before the October 17 deadline.

News of a possible agreement is good for risk-seeking investors, ANZ senior manager FX in Auckland Sam Tuck said.

“The Australian dollar and all associated risk currencies have seen a bit of a bid on hopes that they are imminent in the US to providing us with a solution or a deal,” Mr Tuck said.

“US President Barack Obama was scheduled to start a meeting with the Congressional leaders.

“It has all the right people in the right place to agree to a deal and bring the parties together.

“That’s the real driver behind the markets, that on this Columbus Day, the politicians have been working hard and have come really close to a deal.”

AAP