The Australian dollar is higher after surprisingly high inflation numbers made another interest rate cut less likely.
At 1200 AEDT on Wednesday, the Australian dollar was trading at 88.64 US cents, up from 88.19 cents on Tuesday.
The local currency shot up from 87.90 US cents to 88.53 cents within minutes of the release of official data showing headline inflation, known as the consumer price index, rose by 2.7 per cent in the year to December.
The annual inflation measure was firmer than market forecasts of a 2.5 per cent increase.
The Reserve Bank of Australia's (RBA) preferred underlying measure of inflation also rose, by 2.6 per cent in 2013.
RBC Capital Markets currency strategist Michael Turner said the RBA was likely to keep its easing bias for rates, but the inflation numbers made another rate cut less likely.
"That's what the market's interpreted the numbers to mean," he said.
"The underlying numbers were unusually strong - very, very strong - we haven't seen those sorts of numbers for a couple of years."
The inflation numbers mean the RBA would need more bad economic data to justify the case for another rate cut, Mr Turner said.
"We still think they'll probably keep their easing bias but the market's probably right to question how likely they are to act on that following the data today," he said.
Meanwhile, bonds were weaker.
At 1200 AEDT on Wednesday, the March 2014 10-year bond futures contract was trading at 95.870 (implying a yield of 4.130 per cent), down from 95.945 (4.055 per cent) on Tuesday.
The March 2014 three-year bond futures contract was at 96.980 (2.020 per cent), down from 97.100 (2.900 per cent).