At 12.00pm (AEST), the dollar was trading at $US0.8781/83, up from yesterday's close of $US0.8756/60.
By 12.09pm, the unit was at $US0.8797, its highest level against the US currency since August 22 last year, when it reached $US0.8813.
During the morning, the local unit moved between $US0.8673 and $US0.8797.
UBS economist Matthew Johnson said the local unit had been pushed higher by retail trade data.
"There was a lot of nervousness about the potential for a weak retail sales number," Mr Johnson said.
"The short end still hasn't fully priced in the (interest) rate tightening that is likely to occur.
"There's every chance that, if the numbers continue to be strong over the next few weeks, the RBA could start with 50 point (rate rise) in November.
Australian retail trade at current prices rose 0.9 per cent in August to a seasonally adjusted $19.810 billion, from $19.641 billion in July, the Australian Bureau of Statistics (ABS) said.
The median market forecast had been for retail sales to have risen by 0.5 per cent in August.
The RBA has kept the benchmark interest rate, the overnight cash rate, at a 49 year low of 3 per cent since April.
This rate remains higher than most other western nations and has left the Australian currency looking attractive to currency traders.
Building approval data for August also were released during the session.
The ABS said building approvals fell 0.1 per cent to 12,126 units in August, seasonally adjusted, well below the median market forecast of a 2.5 per cent in the month.
The Reserve Bank's trade weighted index (TWI) was at 68.1, up from yesterday's close of 68.0.
Meanwhile, the bond market was weaker. The yield on the Commonwealth Government March 2019 bond was at 5.301 per cent, up from yesterday's close of 5.226 per cent, while the yield on the April 2012 bond was at 4.792 per cent, up from 4.725 per cent previously.
On the Sydney Futures Exchange, the December 10-year bond futures contract price was at 94.630, down from yesterday's close of 94.715, while the December three-year bond futures contract was at 95.010, down from 95.060 previously.
Dollar tempted higher in midday tradeRetail sales dip 0.1 percent in July
