The Australian dollar has hit a four-month high, helped by continuing speculation that the Chinese central bank will take action to stimulate its economy.

Early Wednesday, the local unit was trading at 91.66 US cents, up from 91.23 cents on Tuesday.

Overnight the currency peaked at 91.76 US cent, its highest level since November 26.

A bout of weak economic data from China in recent weeks has raised hopes that the People’s Bank of China (PBOC) will cut its reserve requirement ratio (RRR) – reducing the amount of cash that banks must hold in reserve in order to free up more funds for borrowing.

BK Asset Management managing director Kathy Lien said a rebound in US and European stock markets also helped the Australian dollar, along with other commodity currencies, rise against the greenback.

“With no data released from Australia, New Zealand or Canada over the past 24 hours, the moves were driven entirely by the improvement in risk appetite,” she said.

“The Australian dollar, in particular, is benefiting from the unwinding of short positions and speculation of accelerated stimulus from the People’s Bank of China.”

Lien said the Australian dollar’s trading pattern recently suggests that its rally could become strong in the coming days.

“If Australian dollar breaks through 92 US cents, we could see the currency pair climb as high as 94 cents,” she said.

There will be two speeches by Reserve Bank of Australia officials on Tuesday, both of which should be of interest to currency markets.

RBA governor Glenn Stevens will make a speech to the 17th Annual Credit Suisse Asian Investment Conference in Hong Kong while deputy governor Philip Lowe will address the Centre for International Finance and Regulation (CIFR) conference in Sydney.