The Australian dollar has opened slightly higher, on talk of a possible bailout solution for eurozone countries, after a week of increasing fears for the European currency.
Bank of New Zealand currency strategist Mike Burrowes said markets around the world were responding positively to news that the eurozone's status could be consolidated with new fiscal rules, following a negative end to last week.
"In a bond auction on Friday (European time), Italy had to pay record rates to sell off its six-month and two-year bonds, and we also had Belgium downgraded one notch to double A, so all that dampened sentiment," he said.
"Over the weekend, developments were a little bit more encouraging. There was talk from France and Germany around a plan to get some firmer fiscal rules in place.
"They've come up with an idea for a bilateral agreement among countries, and the idea is that if they have an agreement to apply tighter fiscal rules, that will be a much faster process than going back and making amendments to the EU (European Union) Maastricht treaty."
Mr Burrowes said this move suggested that despite fears for its currency, the eurozone's debt crisis was coming closer to a solution.
"This is seen by the market as positive - getting rules in place for a fiscal union shows that the eurozone is probably going to stay together," he said.
"It also signals that if they get this treaty in place, it will appease Germany, and it will be happier for the ECB (European Central Bank) to expand its purchases of sovereign bonds.
"Markets have opened a bit higher, so there's definitely a positive response to these developments over the weekend.
"Adding to that is news that the IMF (International Monetary Fund) is thinking of lending 400-600 billion euros to Italy in the next 12-18 months at four to five per cent."
At 0715 AEDT, the Australian dollar was trading at 97.95 US cents, up from 96.95 US cents on Friday afternoon.
European leaders are set to meet on Tuesday for further discussions on a eurozone debt bailout.
