The Australian dollar has risen to a three-month high, surging past $US1.05 on the back of better-than-expected German business data that led to a weaker US dollar.

The currency is currently trading at the day's high of $US1.0533, up from yesterday’s close in Australia of $US1.0491.

A monthly poll by the ZEW think-tank released overnight found morale among German analysts and investors had improved sharply in December, fanning hopes that Germany, Europe’s largest economy, would avoid recession this winter.

‘‘It doesn’t look like it’s anything idiosyncratic with the Australian dollar. It’s just a generalised increase in risk appetite resulting from better-than-expected German business data,’’ said ANZ currency strategist Andrew Salter.

Mr Salter said the Australian dollar was expected to remain strong today, with Asian markets opened fairly buoyant.

‘‘We think the Australian dollar is going to remain well supported, especially because it’s now broken through the $US1.05 level, a level that’s proved a bit of an impediment over the past two or three weeks,’’ he said.

‘‘It’s established itself above $US1.05 successfully, and should hold there for the near term. It’s [also] contingent on what happens tonight with the FOMC [Federal Open Market Committee] and whether they meet market expectations for additional asset purchases.’’ 

Bank of New Zealand currency strategist Mike Jones said the dollar also benefited from optimism surrounding US debt negotiations, with news reports indicating progress was being made in talks between Republicans and Democrats.

‘‘It’s a case of the market maintaining its glass half-full approach to the fiscal cliff talks,’’ Mr Jones said.

Mr Salter said fiscal cliff discussions in the US would continue to add to the dollar’s volatility over the next few weeks, and could negatively impact on it if no deal is struck.

‘‘I think the best way to approach the next few weeks from the Australian dollar’s perspective is to position yourself for appreciation because the fundamental factors for appreciation are in place - that is, a rebound in commodity prices, a rebound in Asian economic activity and also some slightly better data out of the global economy.

‘‘But protect yourself from volatility emanating from the fiscal debate via an options strategy.’’

The positive international data did not dampen the need for the RBA to cut rates again in February, Westpac Bank’s senior international economist Huw McKay said.

‘‘We think the case for interest rate cuts is still very strong. The collapse in business confidence that we got on Tuesday is very consistent with that to offset the weakness in activity once the mining boom peaks,’’ he said.

‘‘The Reserve Bank needs to be acting very decisively to make sure that the interest-rate-sensitive parts of the economy are providing a partial offset to that.’’

with AAP, Reuters