The benchmark S&P/ASX 200 closed up 0.2 per cent at 4967.3 points after hitting a six-week low of 4927.9.
Financials and consumer staples lent support, with ANZ, Westpac, NAB, Woolworths and Wesfarmers up 0.8 per cent to 1.5 per cent.
Leighton was the weakest in the index, down 6.9 per cent, after its chairman resigned over a breakdown in relations with majority shareholder Hochtief.
Yesterday's pattern of buying shares on dips marked a change from the recent weakness, but the rise lacked conviction, as just $4.4 billion worth of shares changed hands, less than the 20-day moving average of $5.4bn.
On a weekly basis, the S&P/ASX 200 fell 3 per cent, its biggest weekly decline since May last year.
Global financial markets might be underestimating the damage to investor confidence that could occur if Cyprus was forced out of the eurozone next week, said Stephen Halmarick, who helps manage $150bn as head of investment markets research at Colonial First State Global Asset Management.
However, he was optimistic that Cyprus would find a way of securing a bailout before Tuesday, when the European Central Bank has warned it would cut emergency funding unless the island nation raised E5.8bn ($7.2bn) to secure a planned international financial bailout.
Macquarie Private Wealth division director Martin Lakos said the macroeconomic environment for equities remained supportive as returns from other asset classes were low, the US economy was responding positively to low interest rates and quantitative easing, China's economic data was improving and the Bank of Japan was adopting a pro-growth bias.
Probability Trader analyst Andrew McCauley said the Australian sharemarket could be in for a strong performance next month.
"The average April return for the All Ordinaries index of 2.01 per cent over the past 20 years rises to 3.65 per cent when the index gains more than 5 per cent in the first quarter," Mr McCauley said. "If the All Ordinaries Index can manage a March close above 4898, then this bullish setup would be in play."
The All Ordinaries index rose 0.1 per cent to 4980.8 yesterday.
The dollar was stronger as worldwide investors bought the currency in search of a safe haven due to uncertainty about European bank stability.
At the close, the dollar was trading at $US1.0426, up US0.53c from Thursday.
Investors worldwide were again buying the dollar because Europe was a potential powder keg once more, Westpac head of global currency strategy Robert Rennie said.
"Momentum within Europe looks like it is stalling," Mr Rennie said. "The safe haven play is back on again for now."
