By Robb M. Stewart 

MELBOURNE, Australia--Reassurance from Federal Reserve Chairwoman Janet Yellen that U.S. interest rates are on track to rise weighed on the Australian dollar Monday and helped lift the local equities market.

Mining stocks responded positively to a weaker currency and a jump in the price of iron ore, Australia's biggest mineral export, while bank shares recovered from further weakness on Friday.

The S&P/ASX 200 closed up 1% at 5721.5, partially retracing a 1.2% fall over past week.

The U.S. dollar was buoyed by Ms. Yellen's remarks Friday, which reiterated the central bank's intention to raise short-term rates this year, though there wasn't new clarity for investors. The comments came after the release of a stronger-than-expected reading on U.S. consumer inflation in April.

Australia's export-sensitive sectors had been struggling of late, as investors worried about a resurgence in the Australian dollar.

Among Australian mining shares, BHP Billiton Ltd. (BHP.AU) climbed 0.8%, Rio Tinto Ltd. (RIO.AU) gained 1.6% and iron-ore producer Fortescue Metals Group Ltd. (FMG.AU) rose 2.8% after the price of the steelmaking ingredient climbed 4% on Friday to US$59.90, according to the Steel Index.

Bank shares were up solidly for the day, with Commonwealth Bank of Australia (CBA.AU) rising 1.1%, Westpac Banking Corp. (WBC.AU) ahead 1.2% and Australia & New Zealand Banking Group Ltd. (ANZ.AU) and National Australia Bank Ltd. (NAB.AU) up 0.8% and 0.9%, respectively.

The four big banks, which have a large weighting in the ASX 200, had fallen sharply this month, after disappointing earnings reports and amid concerns regulators would order lenders to hold more capital against the risk of future economic crises.

Elsewhere, merger-and-acquisition activity led to strong gains in select stocks.

Sirius Resources NL (SIR.AU) rallied 20% after mining company Independence Group NL (IGO.AU) confirmed a cash-and-shares takeover bid, while shares in services company Skilled Group Ltd. (SKE.AU) jumped 12% after it said it had resumed merger discussions with Programmed Maintenance Services Ltd. (PRG.AU).

Write to Robb M. Stewart at

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