The Australian share market closed higher on Tuesday, boosted by some positive commentary from Australia's central bank and a lift in the Shanghai bourse.

Major mining stocks led the gains on the local bourse. The benchmark S&P/ASX200 index was up 45.3 points, or 1.04 per cent, at 4,403.6 points, while the broader All Ordinaries gained 46 points, or 1.05 per cent, to 4,418.7 points.

On the Sydney Futures Exchange, the September share price index futures contract had risen 55 points to 4,383 points, with 29,441 contracts traded.

The minutes of the Reserve Bank of Australia's July 6 board meeting, released on Tuesday, said that an August interest rate rise was likely if official inflation data next week was higher than expected.

However, the central bank expects underlying inflation to have fallen even though the headline rate may be higher.

The RBA said the underlying measure of inflation would fall to be below three per cent and into its preferred target zone for the first time in three years.

Locally in the resources sector, mineral sands miner Iluka Resources was up six cents at $5.41 after it said its June quarter production fell following the closure of its Western Australian operations, but sales volumes were up strongly in the first half of 2010.

Conquest Mining was steady at 30 cents as it said it expected to sign sales deals with two Chinese smelter companies for product from its Mt Carlton gold, silver and copper project in North Queensland in coming months.

African focused uranium producer Paladin Energy eased three cents to $3.58 as it said it was in talks with NGM Resources Ltd ahead of a possible takeover move. NGM was in a trading halt, having last traded at 9.3 cents.

Among other stocks, Qantas Airways ascended 11 cents to $2.38 as it said its new check in facility to be launched in Perth next week for some of its premium frequent flyer members will help reduce queueing time at the airport.

Luxury department store David Jones picked up two cents at $4.57 after it terminated a lease in Queensland's Toombul Centre to concentrate on a more profitable store nearby.

Airport owner MAp Group rose six cents to $2.88 as it said passenger traffic at its three airports grew in June, with the strongest performance at Sydney Airport. The price of gold was $1183.50 per fine ounce, down $8.03 on Monday's close of $1191.53.

The top traded stock by volume was Arrow Energy, with 62.8 million shares worth $293.03 million changing hands. Arrow was 33 cents lower at $4.67.

Preliminary market turnover was 1.69 billion shares worth $4.81 billion, with 606 stocks up, 395 down and 318 unchanged.

Australian Dollar

The Australian dollar rallied on the back of strong Asian stocks Tuesday, unwinding a string of short positions in the process.

Australian bonds were hurt by Asia's stock performance, particularly a robust gain in China that was boosted by growing expectations Beijing will avoid further tightening measures.

While trading largely focused on overseas factors, market participants were also keenly interested on the release of July's meeting minutes from the Reserve Bank of Australia, as well as a speech from Governor Glenn Stevens.

Both the minutes and Stevens' speech were interpreted as cautious on continuing debt concerns in Europe and a potential slowdown in economic growth from a series of factors.

Still, neither the minutes nor Stevens' speech fueled broad market moves, with the Australian dollar rallying sharply despite the cautious tone.

The Australian dollar was quoted at $0.8802, up from $0.8693 late Monday. Against the Japanese yen, the Australian dollar was recently at 76.545 up from 75.355.

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