National Australia Bank's index of business conditions rose in February to the highest reading since the survey began in 1997, with the strength in activity broad-based across major industry groups.

The reading cheered traders who took the Australian dollar to $0.7885, a level not seen since Feb. 26. Technical chart resistance lies at $0.7893, and a breach above could see it testing $0.8000.

"The record level for the business conditions index indicates that business activity in Australia is robust," NAB chief economist Alan Oster said.

"Forward orders have been on a rising trend for several years now signalling an improved outlook for the non-mining economy," Oster added.

"Similarly, capacity utilisation is trending higher, which is a positive for both future investment and employment."

The survey helped lift spirits after official data out last week showed the economy hit a speed bump in the December quarter.

The mood had already brightened after payrolls data out from the United States on Friday showed little sign of inflation, easing speculation about faster rate rises by the Federal Reserve.

Markets also welcomed an offer by North Korean leader Kim Jong Un to stop nuclear and missile testing and meet with US President Donald Trump, in a positive sign for geopolitical stability in the region.

The Australian and New Zealand dollars tend to perform well when global risk appetite is strong, led by carry traders where investors borrow in low-yielding currencies such as the yen or the euro to invest in higher returning assets.

The New Zealand dollar added 0.2 percent to $0.7311, not far from Monday's $0.7323, which was the highest since Feb. 26.

Investor focus was now turning to US consumer price data due at 1230 GMT, with annual core inflation seen flat at 1.80 percent in February.

A higher reading could stoke expectations that the Fed will raise interest rates four times, rather than three times, this year.

Analysts are all but certain about a hike at the Fed's upcoming policy meeting on March 20-21, while another increase in June is almost fully priced in.

New Zealand government bonds eased, sending yields 4 basis points higher at the long end of the curve.

Australian government bond futures were barely changed, with the three-year bond contract flat at 97.850. The 10-year contract inched half a tick higher to 97.1950.