The Australian dollar has clawed back nearly all its losses from a brutal sell-off that started last month as the risk of a US recession fades and traders prepare for the Federal Reserve to start cutting interest rates next month.

The local currency rose above US67.30¢ for the first time in a month. It has rebounded 5.1 per cent since early this month when fears of a hard economic landing in the US roiled markets. The US dollar index, which measures the greenback against six rivals, touched its lowest since January 2, and is down more than 2 per cent this month.