The Australian dollar has hit a fresh 28-year high against the US dollar thanks to Tuesday's official interest rate rise.

At 7:30pm (AEDT) Tuesday, the local currency reached $US1.00104 against the Greenback.

Economists are expecting the dollar to hover around those levels throughout the evening, as markets in Europe and the United States trade.

Tuesday's interest rate rise was a major factor behind the Australian dollar's rise and was followed by a modest rally by the local share market.

The consensus among economists had been for the Reserve Bank to hold rates steady for a sixth consecutive month.

But RBA governor Glenn Stevens says the mining boom has driven a massive expansion in Australia's terms of trade, which is likely to fuel inflation in the medium term.

That supported the central bank's decision to raise the official cash rate by 25 basis points to 4.75 per cent.

After trading lower for most of the day, the All Ordinaries Index edged up 2 points in late trading to 4,773.

The ASX 200 closed 3 points higher at 4,701.