The Aussie got a helping hand from a further sharp rise in prices for iron ore, a major export earner for Australia and a big driver of mining profits and tax revenue.
Chinese iron ore futures jumped nearly 6 percent on Wednesday to hit their daily upside limit, after Brazil's Vale SA said it was cutting output following a deadly tailings dam disaster.
All of which lifted the Aussie 0.5 percent to $0.7191, and away from Tuesday's trough of $0.7138. Resistance now lies at $0.7204 and $0.7235.
The New Zealand dollar was relatively flat at $0.6835, having failed to clear resistance around $0.6872 earlier in the week.
Australian data showed consumer prices rose 0.5 percent in the December quarter and 1.7 percent for the year, to slightly top forecasts.
Core inflation was much as expected at an annual 1.8 percent, completing the third straight year under the Reserve Bank of Australia's (RBA) 2-3 percent target band.
Speculators, however, had been counting on an even softer number and had to pare back bets on a cut in interest rates.
Futures now imply a 52 percent probability of a quarter-point cut in the 1.5 percent cash rate by the end of this year, compared to 70 percent before the data.
"While it does not change the message that inflation is too low and has undershot the RBA's target for several years now, the data, on their own, do not give additional ammunition to the growing rate cut speculation," said Su-Lin Ong, head of Australian fixed income strategy at RBC Capital Markets.
"Nevertheless, a more sustained pick up in inflation remains challenging amid ongoing labour market slack, competitive pressures and structural headwinds to wages growth."
The RBA holds its first policy meeting of the year next Tuesday and will update its economic forecasts on Feb. 8. Markets assume rates will remain unchanged but will be hyper-sensitive to any dovish turn in language from the doggedly upbeat central bank.
Australian government bond futures eased on the inflation news, with the three-year bond contract off 5 ticks at 98.245. The 10-year contract fell 2.5 ticks to 97.745, as the yield curve steepened.
New Zealand government bonds fared better, with yields down around 1 basis point across the curve.