The Australian dollar has rebounded on the back of weaker-than-expected US economic data.

At 0700 AEST on Thursday, the local currency was trading at 94.08 US cents, up from 93.62 cents on Wednesday.

Disappointing data released in the US overnight dragged the greenback lower, giving the Australian dollar a boost.

The US economy shrunk 2.9 per cent annual rate in the first quarter, the sharpest contraction in five years, official figures showed.

Analysts had expected a more modest 1.8 per cent decline.

Also, US orders for durable goods fell in May following three months of gains.

“There was a generally weaker tone in the US data overnight and the Australian dollar was one of the beneficiaries of that,” Bank of New Zealand strategist Kymberly Martin said.

But the direction of the Australian dollar could change with the release of key US inflation figures on Thursday night.

“The US PCE deflator is the Federal Reserve’s preferred inflation measure and the market consensus is looking for a bit of a pickup there and that could support the US dollar,” Ms Martin said.

AAP