Global sharemarkets continued to recover in May, but the Australian dollar lost more than 6% in value against the greenback to consolidate around US72 cents by the end of the month.
In the US, the S&P500 rose by 1.5%, the Dow Jones Industrial Average was up 0.1% while the Nasdaq soared by 3.6%.
In Australia, the S&P/ASX200 was up 2.4%, adding to the 3.3% gain in April, CommSec chief economist Craig James said in a note.
The Japanese Nikkei rose by 3.4% after falling 12.6% in the two previous months, he added.
The German Dax gained 2.2%, outperforming the UK FTSE100, which "actually finished 0.2% lower over the month".
"Investors have become less jittery about the potential for higher US interest rates in coming months," James said.
"Higher oil prices have also served to allay investor fears. Shares had sold off in the first six weeks of 2016 as investors fretted that lower oil prices could cause credit issues for major oil producers and producing nations."
The US dollar (USD) outperformed against all the major currencies, after falling early in the month to its lowest level since January 2015.
Strength came because of improving US economic activity and comments from "a more hawkish" US Federal Reserve, which supported an upward revision to US interest rate expectations, said Commonwealth Bank currency strategist Elias Haddad in a note.
Aussie and inflation
"AUD/USD plunged early in the month after the Reserve Bank of Australia (RBA) unexpectedly cut its policy rate 25bps to 1.75%," Haddad said.
The RBA’s decision to cut the cash rate was because “inflationary pressures are lower than expected”.
"AUD/USD came under more downside pressure as the USD strengthened and after the RBA quarterly Statement on Monetary Policy (SMP) outlined a low for longer inflation forecast. The RBA projects underlying CPI inflation will not reach 2%pa until 2018."