The Australian dollar is firmer after a surprise jump in inflation convinced traders the interest rate cut cycle may be over.
At 1700 AEDT on Wednesday, the Australian dollar was trading at 88.59 US cents, up from 88.19 cents on Tuesday.
The local currency shot up from 87.90 US cents to 88.53 cents in late morning trade following news the consumer price index had risen by 2.7 per cent in the year to December.
This official annual measure of headline inflation was firmer than market forecasts of a 2.5 per cent increase.
The Reserve Bank of Australia's (RBA) preferred measures of underlying inflation, which exclude volatile price items, also rose by a strong 2.6 per cent.
OzForex chief currency strategist Jim Vrondas said the inflation figures convinced traders the RBA was done with cutting rates.
"It certainly caught the market by surprise," he said.
"Futures markets seem to be ... scaling back any expectations of a possible cut soon."
The Australian dollar reached an intraday high of 88.73 US cents in late afternoon trade after the Bank of Japan declined to announce new stimulus spending, following its two-day policy meeting, which weakened the US dollar against the yen.
"The market was expecting a possible increase to their stimulus which didn't eventuate," Mr Vrondas said.
"Rather than weaken the yen, the yen actually strengthened on the back of that.
"US dollar-yen went down, so that added a little bit more support to the Aussie."
The Australian dollar was expected to rise above 89 US cents during offshore trade.