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November 19 2012, 6:04PM

The Australian dollar has closed higher after hitting a seven-month high against the Japanese yen during local trading.

At 1700 AEDT on Monday, the currency was trading at 103.67 US cents, up from Friday's close of 103.21 US cents.

During the day, the currency moved between a low of 103.48 US cents and a high of 103.79 US cents, according to IRESS data.

The Australian dollar began the trading week on a positive note, having opened firmer at 103.40 US cents at 0700 AEDT.

The local currency extended gains against the US dollar in morning trade amid a positive day on equity markets, climbing to 103.61 US cents by noon AEDT and managing to hold on to those gains during the afternoon.

A senior currency analyst at financial markets research group Forecast, Lee Wai Tuck, said the Australian dollar rose to 84.48 yen, a seven-month high during the local session.

"That has helped support general Australian dollar sentiment," Mr Lee said from Singapore.

At 1700 AEDT, the Australian dollar was at 84.23 Japanese yen, up from Friday's local close of 83.60 Japanese yen.

The local unit was at 81.24 euro cents, up from 80.83 euro cents.

Mr Lee said currency markets were trading in quiet conditions ahead of some key events, including the release on Tuesday of the minutes of the Reserve Bank of Australia (RBA) November 6 board meeting.

RBA governor Glenn Stevens is scheduled to deliver a speech later on Tuesday.

There were also ongoing negotiations between the White House and the Republican leadership in the US Congress over the "fiscal cliff" that the market was focused on, Mr Lee said.

"You are coming into the last six weeks of the year, so that is adding to the reduction in liquidity as well," Mr Lee said.

The fiscal cliff refers to a looming US budget deadline over a series of tax measures and government spending cuts that ar due to hit in early calendar 2013.

The measures are expected to act as a big drag on US economic growth and have a significant knock-on effect on the global economy, should they come into effect.

Meanwhile, the bond market has closed weaker.

At 1630 AEDT on Monday, the December 10-year bond futures contract was at 96.990 (implying a yield of 3.01 per cent), down from 97.040 (2.960 per cent) at Friday's local close.

The December three-year bond futures contract was trading at 97.460 (2.540 per cent), down from 97.510 (2.490 per cent).

Royal Bank of Canada fixed income strategist Michael Turner said there was little news to offer the bond market much direction during Monday's session, with trading volumes low.

The Reserve Bank of Australia's (RBA) trade weighted index (TWI) was at 76.9, up from Friday's close of 76.6.

By Jordan Chong