The Australian dollar has surged more than 2 per cent, after the Reserve Bank of Australia on Tuesday softened its stance on the currency's strength and signalled a shift away from an easing bias for interest rates.

The Aussie was up 2.2 per cent to US89.39¢ shortly after 5.30am AEDT on Wednesday morning as it continued to pile on gains in the wake of the RBA’s first statement on monetary policy for the year.

Ahead of the statement on Tuesday, the local unit was fetching US87.60¢, but it jumped as high as US88.90¢ not long after the release.

"Most of the market was short Aussie and Kiwi into last night,” ING Capital Markets director of foreign exchange Lane Newman said.

“The RBA surprised them hawkishly. The fact that the world is not going to end, even if China slows down according to the RBA has taken somewhat the boot off of the neck of risk.”

The Reserve Bank on Tuesday opted to keep interest rates on hold at a record low of 2.5 per cent, indicating that it may continue to do so for some time but also signalling a shift away from an easing bias for rates.

“Monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target,” RBA governor Glenn Stevens said in the bank’s statement. “On present indications, the most prudent course is likely to be a period of stability in interest rates.”

The Aussie has fallen by almost a fifth in the past 12 months as a commodities boom expired, growth in China began to slow and the central bank campaigned for a weaker currency to help stir economic growth.

RBA jawboning of the Australian dollar, including comments from Mr Stevens to The Australian Financial Review in December that a $A closer to US85¢ is needed, had also taken a toll.

But Tuesday’s statement dropped the RBA’s line that the local unit is overvalued, instead shifting emphasis to inflation.

Citi currency strategist Todd Elmer said after the RBA statement that the local currency had outperformed other commodity currencies since stronger than expected inflation numbers in January.

“In terms of what the RBA delivered, I think they went even beyond hawkish market lean coming in to the meeting, because the changes in terms of the guidance are more explicitly moving towards a neutral stance,” Mr Elmer said.$NZ accelerates rise against greenback

In other currency movements, the US dollar and euro gained back some ground against the yen but were firmly in recent ranges, reflecting the drop in volatility that accompanied the flood of money out of emerging economies in search of traditional safe havens in the developed world.

The New Zealand dollar accelerated its rise against the greenback in early New York trade, to gain 1.14 per cent on the day, holding at US81.72¢.

The euro dropped below $US1.35 against the dollar, revisiting Monday's two-month low of $US1.3475.

"Part of the reason why the euro is not really participating in the moves today where the dollar is weaker, has to do with this fear the ECB (European Central Bank) is going to ease policy again on Thursday," said Jens Nordvig, head of G10 FX strategy at Nomura Securities in New York.

Ahead of the ECB's meeting, the euro traded down 0.18 per cent to $US1.3494.

"I think there are reasons why they should do it but I am not convinced that they will," Nordvig said.

The US dollar was up 0.44 per cent at 101.42 yen, staying above Monday's low of 100.77 yen, its lowest level against the Japanese currency since November 21. Yen-selling flows from Japanese banks helped lend support to the dollar, said a trader for a European bank in Tokyo.

The yen, a big loser against the dollar in the past year, has seen a turnaround in the past week on the back of the sell-off in emerging markets, the dollar falling back from a peak of 105.40 yen hit earlier in January.

with Reuters