The Aussie traded higher as a result of mild inflation data, as underlying prices dashed expectations for a near-term rate cut.
AUD/USD traded at 0.7981, up 0.57%, while USD/JPY changed hands at 118.14, up 0.25%. EUR/USD
edged down to 1.1335, down 0.39%.
The U.S. dollar index, measuring the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.31% to 94.56, according to Investing.com.
Australia said fourth quarter CPI rose 0.2% quarter-on-quarter and 1.7% year-on-year, below expectations of up 0.3% and up 1.8% respectively and well below the Reserve Bank of Australia's 2% to 3% inflation target.
But underlying inflation - the most important number watched by the market and the Reserve Bank - was more than expected at a gain of 0.7% and is likely to cool expectations for a near-term cash-rate cut.
Some time earlier, the Westpac-MI published its leading index for December, which was unchanged at 97.89, breaking a pattern of sub-trend growth heading into 2015.
Overnight, the dollar extended losses against the other major currencies on Tuesday, after the release of mixed U.S. economic reports, as investors turned their attention to the Federal Reserve's upcoming policy statement on Wednesday.
According to the Conference Board, its index of U.S. consumer confidence improved to an eight-year high of 102.9 this month from a reading of 93.1 in December, whose figure was revised up from a previously reported 92.6. Market participants expected the index to increase to 95.1 in January.
Separately, the U.S. Commerce Department reported that new home sales climbed by 11.6% to 481,000 units last month, above expectations for 450,000. New home sales in November were revised down to 431,000 units from a previously reported 438,000 units.
Data released earlier in the day showed that total U.S. durable goods orders dropped 3.4% last month, compared to expectations for a gain of 0.5%.
