The Australian dollar rallied to its highest level in nearly four weeks on Wednesday as the gold price firmed more than 1 percent in the wake of North Korea's test-launches of several missiles.
The Aussie had slipped to 74.30 US cents from 74.70 cents as the yen initially came under pressure on reports of the missile launches, providing broader strength for the US dollar.
But a rise in the gold price to a one-month high of $630 an ounce helped the Australian currency reverse the early loss. The Aussie benefits from a stronger gold price as Australia is the world's second-biggest producer of bullion.
The AUD was $0.7462/66, after a high of $0.7474, and compared with $0.7440/45 late here on Tuesday. The Reserve Bank of Australia left the cash rate at 5.75 percent for a second month in a row after Tuesday's monthly board meeting, as expected, but interest rate markets remain priced for the risk of a tightening, possibly as early as August.
"Expectations of another rate hike in August will be sustained by the risk of an upside surprise in the CPI," said National Australia Bank strategist John Kyriakopoulos.