The benchmark S&P/ASX200 index gained 29.6 points, or 0.33 per cent, to 8,838 by noon on Wednesday, as the broader All Ordinaries improved by 31.4 points, or 0.35 per cent, to 9,032.7.
"Our long-held call for no further hikes this year is reinforced by today's (US inflation) print, though the outlook now hinges heavily on the trajectory of the Iran conflict," Ebury economist Anthony Malouf said.
"The US dollar sold off broadly as markets trimmed Fed rate hike pricing, with a September move now around two-thirds priced, down from fully priced before the release."
Oil edged higher as the US and Iran continued to trade strikes in the Persian Gulf, as US President Donald Trump walked back threats to charge a toll for the safe passage of ships through the Hormuz Strait.
A 3.8 per cent rally in BHP shares to $60.94 supported the local exchange, as iron ore futures and copper prices improved.
Rio Tinto shares managed a 0.9 per cent advance after the miner improved its first-half copper output and held its production guidance steady across all commodities.
Gold miners were mixed as the precious metal hovered near $US4,037 ($A5,779) an ounce, while Evolution weighed on the sub-index after flagging a significant inflationary impact on all-in sustaining costs in its quarterly update.
The heavyweight financials sector eased almost 0.2 per cent, as the big four banks weighed, while Macquarie gained 1.3 per cent to $256.25.
The energy segment eased from its recent rally, slipping 0.7 per cent as oil's push ran out of momentum, prompting investors to take some profits on Woodside, Santos, coal producers and refinery operators.
Local IT stocks gained 0.8 per cent as Prime Minister Anthony Albanese flagged plans to establish an office of artificial intelligence within his department.
Consumer-facing stocks remained under pressure, with staples losing 0.8 per cent and cyclicals dropping 0.6 per cent as Woolworths, Coles, and Aristocrat Leisure sold off.
In company news, KPMG is eyeing hundreds of job cuts and plans to cut partner pay by as much as 20 per cent, as the fallout from its leaks scandal continues, the Financial Review reports.
Webjet has appointed former Wesfarmers and Australia Post executive Nicole Sheffield as managing director and CEO, following former boss Katrina Barry's May resignation.
The corporate watchdog has fined NAB-owned online broker WealthHub more than $1 million over allegations it failed to report regulatory data more than 9.5 million times over a decade.
The Australian dollar was buying 69.86 S cents, up from 69.28 US cents, as the greenback lost ground against most major currencies
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