The Australian dollar has rallied, with analysts tipping it to hit 77 US cents, as global risk appetite increases and after the greenback fell on weak US business productivity data.

At 0700 AEST on Wednesday, the local unit was trading at 76.73 US cents, up from 76.33 cents on Tuesday.

Westpac senior market strategist Imre Speizer said the US dollar lost more ground overnight after data showed a third consecutive quarter of declining output of US goods and services.

This is the longest stretch of falling productivity since 1979.

“The US productivity and domestic labour costs data were disappointing and indicated that the Federal Reserve would not need to rush in with a rate hike,” he said.

“This pushed US interest rates lower overnight, which rubbed off the US dollar which also fell. Risk appetite was also strong last night which helped the Aussie.”

He said stronger commodity prices and the search for higher-yielding currencies would likely drive the local dollar to 77 US cents this week.

AAP

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