The dollar closed slightly higher even after a downward trend throughout the trading day.

The Aussie buck closed at $US0.8979/82, marking a gain of 1.5 US cents from Friday's local close of $US0.0.8869/71. The local currency traded between $US0.9031 and $US0.8973 since the start of trading hours.

Trading began strong due to favorable pronouncements made on Friday night. US Federal Reserve Chairman Ben Bernanke said the Fed was prepared to take aggressive steps to cushion the US economy from further decline.

Bernanke expressed optimism of US economic expansion in 2011 despite a sharp drop to 1.6 percent in US economic growth for the April-June period. The assurance resulted in a 1.5 percent rise in US stocks.

The Australian currency, however, slid below $US0.90 in the middle of the afternoon when Japan's central bank decided to increase its liquidity. Inspite of a strong Yen, the decision to soften up on its monetary policy was arrived at during an emergency board meeting called by Bank of Japan governor Masaaki Shirakawa.

Japan's central bank left its interest rate at 0.1 percent. The measure will expand a low-interest loan program for financial institutions from 20 trillion yen to 30 trillion yen ($A393.59 billion) in order to boost liquidity.