The Australian dollar rose after reports that France and Germany had agreed to boost Europe's rescue fund.
Optimism was sparked on global markets, pushing US equities higher, after the Guardian newspaper said that Germany and France had reached an agreement to increase the European rescue fund to two trillion euros ($A2.72 trillion) as part of a "comprehensive plan" to resolve the sovereign debt crisis.
HiFX trading director Mike Hollows said the reports caused the Australian dollar to spike sharply.
"That just shows that the market is very, very flighty," Mr Hollows said.
"It's certainly quite reactive and liquidity is very thin out there."
At 0930 AEDT, the Australian dollar was trading at 102.54 US cents, up from 102.04 cents yesterday.
Mr Hollows said there was no major economic data to move the Australian dollar expected on Wednesday.
At 0925 AEDT, Reserve Bank of Australia assistant governor Guy Debelle is due to address the Annual Finance and Treasury Association Congress in Sydney.
Westpac and the Melbourne Institute are due to release their Leading Indexes of Economic Activity for October, later in the morning.
Since 1700 AEDT, the domestic currency has traded between 101.25 US cents and 103.20 US cents.
