The Australian dollar surged to an eight-week high after European leaders surprised markets and reached a breakthrough to resolve the eurozone debt crisis.

Eurozone leaders announced on Thursday (European time) a plan to shore up their bailout facility, pledging new funds for Greece and persuading banks to agree to major writedowns in an accord reached after two successive summits.

French President Nicholas Sarkozy announced at a summit in Brussels that eurozone leaders had agreed to leverage the 440-billion-euro ($A591 billion) European Financial Stability Facility (EFSF) to one trillion euros ($A1.34 trillion).

Bank of New Zealand currency strategist Mike Burrowes said currencies, equities and commodities rallied in response to the news.

“It was a massive move in terms of the Aussie as well, which moved over three per cent higher,” Mr Burrowes said.

“Risk appetite everywhere has gone crazy.

“It seems that the market is pretty relieved that we got the EU rescue package.”

At 0700 AEDT on Friday, the Australian dollar was trading at 107.17 US cents, up from 105.34 US cents on Thursday.

Since 1700 AEDT on Thursday, the currency has traded between 105.25 US cents and 107.53 US cents – its highest level since September 1.

Mr Burrowes said the magnitude of the rally wasn’t as strong as it could have been, as most of the details of the package had already been known to market-watchers.

“We knew that the EFSF was going to be over a trillion dollars and that it was going to use leverage and we knew the banks were going to be re-capitalised.

“The fact that we knew a lot of the details maybe suggests that the rally can’t go too much further, unless we get some more positive information.”

He said the local unit may settle back towards 104 US cents in the coming period.

No major local economic data was due on Friday.