The dollar shot up to 72.30 US cents on Friday, the highest since January 7, as investors grew more hopeful about the state of the global economy.

The dollar has since eased to 71.39 US cents on Friday afternoon trade.

HiFX senior consultant Derek Mumford said investors used the weak car sales data released on Friday as an excuse to take profits and push down the currency.

''It was reaching key resistance at 72.5 US cents,'' he said.

''Then the pretty ordinary vehicle sales came out.''

New car sales sank 17pc in March, over the same month last year, the Federal Chamber of Automotive Industries said today.

Improving investor sentiment has pulled the Australian dollar steadily higher in recent weeks, seeing it close over US70 cents twice in the past seven sessions.

The Australian dollar ''has gone down quite sharply but it went up sharply'' as well, Mr Mumford said.

Mr Mumford said he expected that the dollar would eventually fall back to 65 US cent in the medium term, following a future market sell off.

But Kinetic Securities chief economist Clifford Bennet said the Australian dollar had a "great rally'' and was expected to build on its gains.

"Our medium term target remains 79 US cents,'' he said.

"We have had 69 and 79 US cent targets all year on the expectation of the world economy doing better than consensus expectations and Australia having a momentary recession only.''