Anglo-Australian mining company BHP Billiton Ltd. (BHP, BHP.AU) purchased billions of Australian dollars as recently as several weeks ago, according to a person close to the trade. Now the question is: why?

The buying will undoubtedly fuel recent rampant speculation that BHP is considering a purchase of Perth-based Woodside Petroleum Ltd. (WPL.AU), possibly through a share purchase that would buy out Royal Dutch Shell PLC's (RDSB, RDSB.LN), 24% stake in the company.

On Monday BHP threw cold water on the Woodside speculation, saying it's "not aware of any basis for the market speculation." What's more, the mining giant's A$6 billion share buyback, completed Monday, could explain its large purchase of Australian dollars.

But bankers and other industry watchers don't rule out the possibility that at some point BHP will pounce on Woodside as a means of bulking up its oil business. If it were still considering at some point launching such a deal--which could cost upwards of $40 billion--it could make sense to quietly start stockpiling the Australian currency.

Either way, the Australian dollar has been on a steady climb against the U.S. dollar for the past month, in part thanks to record-high commodity prices and a flight from the U.S dollar, and possibly helped by the BHP buying. It was at 1.049 during London midday trading Wednesday.

BHP, with plenty of cash to put to work following the commodities boom, has been in the market to diversify its business. Last summer it launched a $40 billion bid for Canadian fertilizer firm Potash Corp. (POT, POT.T) that was blocked by the Canadian government.

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