TOKYO, Jan 27 (Reuters) - The Australian dollar rose on Wednesday after data showed fourth quarter domestic inflation rose at a slightly higher than expected pace.

The Aussie was up 0.5 percent at $0.7037, putting some distance between a seven-year low of $0.6827 struck earlier in the month. Lower commodity prices and prospects of slower growth in China, Australia's major trading partner, have hit the currency this year.

Data on Wednesday showed the Australian consumer price index (CPI) rose 1.7 percent in the fourth quarter from a year earlier, against economists' forecasts for a 1.6 percent gain.

(Reporting by Shinichi Saoshiro; Editing by Shri Navaratnam)