Global markets rose overnight and so did the Australian dollar after US Federal Reserve chair Janet Yellen announced she will not be making any abrupt changes to US monetary policy.

Addressing the House Financial Services Committee, Janet Yellen emphasised that the Fed is aiming for stability and continuity, saying she strongly supports the approach of her predecessor Ben Bernanke.

She indicated that, unless something significant derails the economy, the central bank will keep reducing stimulus by $US10 billion a month despite recent disappointing unemployment reports and volatility on global markets.

“Economic activity and employment will expand at a moderate pace this year and next,” she explained.

“The unemployment rate will continue to decline and inflation will move back toward two per cent over coming years.”

Last week’s official employment figures revealed the jobless rate had fallen to 6.6 per cent, although jobs growth was lacking, but Ms Yellen indicated that the Fed is not too troubled by this.

“Our sense is that at this stage these developments do not pose a substantial risk to the US economic outlook,” she added.

The Dow Jones Industrial Average ended 1.2 per cent higher at 15,995.

The S&P 500 closed 1.1 per cent higher and the Nasdaq was up 1 per cent.

Markets have also been buoyed by a deal between Republicans and Democrats to raise Washington’s borrowing authority.

Across the Atlantic, European markets rose, comforted by Janet Yellen’s testimony.

London’s FTSE rose 1.2 per cent to 6,672.

On the continent, the Euro STOXX 50 added 1.5 per cent.

In company news, Britain’s second biggest bank, Barclays has announced plans to cut up to 12,000 jobs this year, including 7,000 in the UK.

The local share market is set for a good start to trade, the ASX SPI 200 is 0.8 per cent higher at 5,245.

The Australian dollar was expected to fall following Ms Yellen’s testimony, as talk of a continued a reduction in US stimulus should push the US dollar higher.

However, it went the other way rising back above 90 US cents for the first time in a month.

At 7:47am (AEDT) it was worth 90.4 US cents.

The spot gold price continued yesterday’s rally to stand at $US1,289 an ounce.

West Texas crude closed at $US99.94 a barrel, while Singapore’s Tapis crude went into retreat and was down to $US115.50.