Investors cheered by likely extension of US stimulus program

Australia's sharemarket has hit fresh five-year highs as leadership moves at the US Federal Reserve hit reset mode.

Larry Summers, the man tipped to replace Fed chairman Ben Bernanke, pulled out of the race, taking with him anxiety that the central bank would aggressively start reeling in its $US85 billion-a-month stimulus.

Mr Summers' withdrawal has elevated Janet Yellen, who has strongly advocated quantitative easing, to become the main contender to succeed Mr Bernanke.

Investors across the globe warmed to that prospect, with the benchmark S&P/ASX 200 Index strengthening 28.37 points, or 0.5 per cent, to 5248, its highest close since June 26, 2008.

The dollar also rallied, briefly touching US93.98¢, before settling at US93.38¢ at market close.

IG Markets strategist Evan Lucas said some investors had described the possibility of Mr Summers as "one of the two biggest concerns in the macro world".

"His hawkish views did pose a threat to the timeline of the tapering, with some expecting him to move very quickly to remove it, which would see a very sharp liquidity withdrawal," Mr Lucas said.

"However, with his removal from the race, it has become a one-horse race; with Professor Janet Yellen now having one hand on the chair. Her position in the FOMC is one of general dovishness and this news will delight emerging markets and risk markets."

The resource sector was the biggest winner on the ASX, advancing more than 1 per cent. Goldminers led the gains, after the metal gained 1 per cent to $US1325.15 an ounce, buoyed by Mr Summers' exit as a contender for the Fed leadership. Kingsgate was the best performer, advancing 5.6 per cent to $1.79, while Newcrest, Australia's biggest listed gold producer, rallied 5 per cent to $12.63.

But it wasn't all rosy. Discovery Metals was the ASX's worst performer, tumbling 11.5 per cent to 11.5¢ after it delayed a deadline for recommending a takeover for the fourth time.

Car lease company McMillan Shakespeare continued its slump into the red, falling 2.5 per cent to $11.95, despite Prime Minister-elect Tony Abbott saying he would scrap Kevin Rudd's proposed changes to fringe benefit tax.