The Australian dollar is sharply higher today after yesterday’s speech by US Fed president Janet Yellen and positive numbers out of China.

At 6.36am (GMT) the Aussie dollar was trading at US78.81c up from US78.30 at yesterday’s close.

In her testimony to the US congress yesterday, Yellen testified that the US Fed would assess the economic situation on a month by month basis before making any move on interest rates.

She also noted that while some sectors of the economy were moving forward, inflation is still well below the central banks comfort zone and wage growth continues to underperform,

“There has been important progress, however, despite this improvement, too many Americans remain unemployed or underemployed, wage growth is still sluggish and inflation remains well below our longer-run objective.” Yellen said.

The flash HSBC/Markit Purchasing Managers' Index (PMI) for the month of February came in at 50.1 today, slightly above the all-important 50 point level which shows the economy is in growth mode.

Although the number was positive, the index shows there are still risks associated from a lack of foreign demand and the government may have to step in further to help stimulate the economy.

According to HSBC chief China economist Hongbin Qu there was "a marginal improvement in the Chinese manufacturing sector going into the Chinese New Year period in February”.

"However, domestic economic activity is likely to remain sluggish and external demand looks uncertain. We believe more policy easing is still warranted at the current stage to support growth” he said.