The Australian dollar rose to an overnight peak of US71.52c, its highest in more than two weeks, in the wake of the Liberal Party spill late on Monday. Photo: Dominic Lorrimer

Currency markets have reacted positively to news that Malcolm Turnbull has ousted Tony Abbott to become Australia's 29th prime minister, as economists predict that the coup could boost business and consumer confidence.

The Australian dollar rose to an overnight peak of US71.52c, its highest in more than two weeks, after the Liberal Party spill late on Monday. On Tuesday the Aussie further rose, fetching US71.65c in mid-morning trade.

Shortly after Mr Turnbull announced his challenge late on Monday afternoon the currency dipped to a low of US70.63c before slowly ascending after it became increasingly clear that a change in the leadership was imminent.

BK Asset Management managing director Kathy Lien said Australian dollar traders cheered Mr Abbott's defeat.

"However, Turnbull won by a very small margin and internal divisions within his party could lead to continued political uncertainty," she cautioned, adding that Tuesday's focus would be more on the minutes of the Reserve Bank's September meeting for more details on its thinking about an economic slowdown in China.

The Aussie had already been on the rise late last week after better than expected local employment data, and amid a sense that the currency had been oversold during the recent markets rout sparked by turmoil in Chinese equities. 

But analysts said the change in leadership could provide a much-needed boost to consumer and business confidence, which in turn is likely to support economy and ultimately the Australian dollar.

Citi analyst Josh Williamson said both the change in PM but also an expected new Treasurer should be positive for financial markets.

"The market had lost faith in Joe Hockey following poorly received budgets and a perceived inability to 'read' the economy, in our view," Mr Williamson said in a note.

Mr Williamson predicted the change in prime minister would lift sentiment.

"We think both business and consumer sentiment readings have been adversely affected for a number of months by the lack of economic and fiscal policy direction under Tony Abbott and Joe Hockey," Mr Williamson said.

RBC Capital Markets head of economics Su-Lin Ong agreed that the changes in Canberra could short-circuit the business confidence malaise.

"We expect a boost to business confidence, which remains below its long-run trend and has struggled to maintain any momentum in recent years," she said.

"Malcolm Turnbull's narrative of engaging in informed economic debate rather than catch phrases provides some hope that previously forgotten inquiries into areas that could increase economic growth, productivity and supply side reform could now receive more attention."

Ms Ong added that a rise in confidence could well prevent the Reserve Bank from cutting the cash rate another time.

"The RBA's frustration over the lack of 'animal spirits' and pick-up in non-mining investment has been well articulated over the last 12 months and the confidence factor has, in our view, been the missing link."