THE Australian dollar closed more than one US cent higher, after an early surge on the back of strong consumer confidence figures.
At 5pm AEST, the Australian dollar was trading at $US0.8815/18, up from Tuesday's close of $US0.8703/05.
Since 7am AEST, the domestic dollar traded between $US0.8850 and $US0.8743.
RBC capital markets senior economist Su-Lin Ong said the only bounce seen in the local unit came after strong consumer confidence numbers were released early in the trading day.
"It lent a little bit of support in the Aussie," she said.
The Westpac-Melbourne Institute of consumer sentiment index rose 11.1 per cent in July to 113.1 points.
The survey was above 100 points, which indicates optimists outweigh pessimists, for the 13th consecutive month.
It was also the strongest monthly increase in the index from a base above the 100 level since the survey began in the mid-1970s.
"The solid base for consumer sentiment is coming from an upbeat view on the economy," Westpac chief economist Bill Evans said.
Ms Ong said consumers were showing relief at the resolution of the federal government's mining tax, a strong labour market and the Reserve Bank of Australia's (RBA) decision to keep the cash rate on hold last week.
"It reversed the drops in the last couple of months," she said.
"It boosted the Aussie and then it just came off from there."
Ms Ong said the unit did not react to the federal government's updated economic forecast released during the session.
In an updated statement on the economy on today, Treasury said Australia's underlying cash balances would improve slightly through to 2012/13.
The underlying cash deficit for 2009-10 was forecast at $55 billion, less than the $57.1 billion predicted in May, while the deficit for 2010-11 was forecast to be $400 million lower at $40.4 billion.
Ms Ong said investors would now await key Chinese data due tomorrow (AEST) including its consumer price index, GDP and industrial production data.
Market forecasters expect China's inflation rate to have picked up in the year to June to 3.3 per cent, higher than the previous reading of 3.1 per cent.
China's GDP data, meanwhile, is expected to show that nation's economy grew 10.5 oper cent in the year to June, a slight slowdown from 11.9 per cent previously.
Meanwhile, the Australian stare market has closed higher, lifted by hefty gains from the big miners and major banks.
At 4.15pm AEST, the benchmark S&P/ASX200 index was up 82.1 points, or 1.87 per cent, at 4,462.4 points, while the broader All Ordinaries index had risen 77.3 points, or 1.76 per cent, to 4,477.3 points.
On the Sydney Futures Exchange, the September share price index contract was 80 points higher at 4,439 points, with 25,812 contracts traded.
The market jumped out of the gates at the opening bell, climbing 1.5 per cent thanks to a bright finish on Wall Street and firmer commodities prices during the offshore session.
The market held on to those early gains for most of the session, before closing on its highs for the day thanks to a late spurt just before the end of trade.
At the finish, about 11 stocks closed up for every five that ended down, with 19 among the S&P/ASX20 closing in positive territory and financial stocks the top six best performers.
Westpac was the biggest mover climbing 3.23 per cent, or 72 cents, to $22.98, while Commonwealth Bank was not far behind, up 3.12 per cent, or $1.56, at $51.49.
The lone stock in red figures in the S&P/ASX20 was CSR, down four cents at $33.76.
The other retail banks also had a good day.
