The Australian dollar has rallied after the central bank indicated the cash rate will stay unchanged for some time.

At 0700 AEDT on Wednesday, the Australian dollar was trading at 89.33 US cents, up from 88.67 US cents on Tuesday.

The Reserve Bank of Australia kept the cash rate unchanged at a record low of 2.5 per cent on Tuesday and made no reference about the local currency needing to depreciate further.

The RBA’s signal that there will be stability in the cash rate for some time has bolstered the Australian dollar, ANZ senior FX strategist Sam Tuck said.

He said the Australian dollar was also a favourite for traders to sell in risk-off environments.

“We have had bit of reversal of the weakness in the equity markets last night and the Aussie still has a correlation with global risk sentiment,” Mr Tuck said.

“As that bounced it reinforced the Aussie to stay up but by far the bigger move came from the RBA.”

AAP