The Australian dollar was almost half a US cent higher, amid growing market optimism over Japanese economy and the Libyan insurgency.
At 1700 AEDT, the Australian dollar was trading at 100.68 US cents, up from Monday's local close of 100.20 US cents.
Since 0700 AEDT on Tuesday, the currency has traded between a low of 100.37 US cents and a high of 100.69 US cents.
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Market concerns have eased over the possible economic impact of Japan's earthquake and nuclear crisis as Japan's central bank pumped more cash into the currency market to dampen the rising yen.
Meanwhile, forces loyal to Libyan President Muammar Gaddafi have come under continued pressure from rebels and international forces enforcing a no-fly zone.
Westpac chief currency strategist Robert Rennie said the Australian dollar was strong despite the aftermath of the Japanese earthquake and tsunami.
"I think resilient is a good way of describing price action today," Mr Rennie said.
"Overnight we continued to have news out of Libya in general, but I guess the gains that we've seen in equities globally and particularly Japan coming back from its holiday yesterday, with strong gains in the Nikkei helped the Australian dollar hold onto the overnight gains.
"I think this is a reaction to the very negative situation we had last week.
"I think we're getting to the point where we are overdoing that, but I guess we'll just have to keep an eye on price action over the next couple of days."
Mr Rennie said currency markets were likely to continue to be led by events in Japan and the Middle East, but the release of UK inflation data on Tuesday night (AEDT) would be of interest to currency traders.
The annual pace of inflation in the UK is forecast to rise to 4.2 per cent for February, from 4.0 per cent in January, above the Bank of England's target rate of 2.0 per cent.
"Obviously inflation in the UK is getting to very uncomfortable levels," Mr Rennie said.
The Reserve Bank of Australia's (RBA) trade weighted index (TWI) was at 74.2, up from Monday's close of 74.0.
