The Australian currency strengthened more than one US cent to a 25-month high on Wednesday after the US Federal Reserve signalled it might engage in another round of quantitative easing.

At 5pm AEST, the local unit was changing hands at 95.64 US cents, up from Tuesday's close of 94.54 cents. Since 7am AEST, it had traded between 95.34 and 95.83 cents.

Just before 1100 (AEST) the local unit reached its highest level since August 1, 2008.

In a statement on Tuesday night (AEST) the US Fed said it is "prepared to provide additional accommodation" to the American economy.

The statement by the Fed's policy making arm, the Federal Open Market Committee stood in direct contrast to recent comments by the Reserve Bank of Australia's (RBA) about the health of the domestic economy and prospects for an interest rate rise soon.

Nomura Australia chief economist Stephen Roberts said the Aussie dipped after reaching a peak of 95.83 US cents in late morning trade.

However, it bounced back towards the European open as traders examined the likelihood RBA will lift interest rates in October.

"You've got the exact polar opposite of what the central bank is planning to do here compared with what the Fed is probably preparing the market for in the United States,'' Mr Roberts said.

"That is certainly helping the Australian dollar and continues to support it.''

He said the greenback had potentially reached a soft spot against most currencies.

"At the same time, we've had various speeches from senior RBA officials late last week and the earlier part of this week, including (governor) Glenn Stevens, sounding very upbeat about Australia's growth rate looking ahead.''

Mr Roberts was confident the Aussie would stay around its lofty heights in the absence of any significant data during the offshore session.