In late trade the Australian dollar was enjoying the view at $1.0122, after climbing 1.5 percent on Tuesday to as far as $1.0149, the highest since Jan 4.

Its rally from a low of $0.9864 on Monday caught the market in a vicious short squeeze and which now has would-be bears reluctant to sell again.

"It's a symptom of risk environment," said Robert Rennie, chief currency strategist at Westpac. "We have a number of metals doing particularly well; we had fresh record high for tin; the U.S. ISM at highs since May 2004; the UK PMI was the highest in a 20 year history."

"It's just risk on, risk on, risk on."

A string of strong global manufacturing data augured well for continued strong demand for Australia's resource exports, notably iron ore and coal which have boasted huge prices increases in recent weeks.

As a result, an index of Australian commodity prices from the Reserve Bank of Australia (RBA) surged 4.5 percent in January to be a staggering 49 percent higher on the same month last year.

The boom in export earnings is boosting profits, investment, employment and incomes and is a major reason the RBA is still likely to lift interest rates again in coming months, despite the drag from floods and cyclones.

That outlook was in marked contrast to the Federal Reserve which has committed to near zero rates until unemployment shows clear signs of trending lower.

"I expect the Aussie to remain in a $0.9950 to$1.0250 range," said Westpac's Rennie. "I don't think there is a particularly compelling argument to go lower but if we do it's purely on the basis of the risk environment."

Support for the Aussie was seen from its Jan 24 high of $1.0023, with the currency now set to test resistance at $1.0152 and $1.0183.

The New Zealand dollar has also been buoyed by commodity prices with prices at its latest dairy auction soaring 7.2 percent -- a level that will benefit the country's farmers.

On Tuesday, a survey showed prices for New Zealand's main commodity exports hit a record high in January, raising hopes that it will slowly filter through to the broader economy, which is struggling to pick up steam.

The NZ dollar was firm around $0.7812, after powering to a two-month high of $0.7823 overnight.     Technically, the kiwi is set to test $0.7837, the high on Nov. 22, if it can hold above key resistance at $0.7815, which may lead the way to a new trading range of $0.7800 to $0.8000.

"While the road higher may not be particularly easy, further dips in the currency will be supported and may be shallow," said ANZ Bank senior strategist David Croy.

The kiwi also edged up on the Aussie to NZ$1.2929, from NZ$1.3004 on Tuesday.

Still, traders were cautious in the run-up to the December quarter unemployment number on Thursday, after some initial data hinted at possible downside risk to market expectations of stable jobless rate around 6.4 percent.

A rate rise is fully priced in for both July and September this year, while about 67 basis points were priced in over the next 12 months.

New Zealand government debt recovered, with yields down a tad across the curve, while swap rates   were largely flat. The swap curve has steepened following a slew of weak economic data.

Australian bond futures eased as stocks rallied. The three-year contract dipped 0.020 points to 94.90 and the 10-year contract fell 0.020 points to 94.430.