Australian Dollar Falls Despite RBA Rate Hike

(RTTNews) - The Australian dollar retreated from recent highs against other major currencies in the Asian session on Tuesday, despite the Reserve Bank of Australia raised its key interest rate by a quarter-point as risks to inflation remain tilted to the upside.

The policy board, governed by Michele Bullock, decided to lift the cash rate target by 25 basis points to 4.35 percent.

This decision followed similar quarter-point increases in February and March.

At the meeting, eight board members voted in favor of the hike, while one member voted to maintain the rate at 4.10 percent.

The board observed that higher fuel prices are adding to inflation and there are indications that this is likely to have second-round effects on prices for goods and services more broadly.

This is in addition to the high inflation seen around at the start of the year, reflecting capacity pressures in the economy, the board noted.

Asian stock markets traded lower, with major markets in the region, China, Japan and South Korea closed, as traders react to the re-escalation of the Middle East conflict and the related spike in crude oil prices that has again raised global inflation concerns.

U.S. forces repelled Iranian attacks while escorting two U.S.-flagged vessels through the Strait of Hormuz. Meanwhile, the UAE reported intercepting cruise missiles launched by Iran and attributed a major fire that broke out at a major oil industry zone in the U.A.E. at its Fujairah port to a drone strike.

A social media post from the UAE's Defense Ministry said four cruise missiles launched from Iran were detected toward various areas across the country.

In the Asian trading today, the Australian dollar fell to a 1-week low of 1.2155 against the NZ dollar and a 6-day low of 0.9723 against the Canadian dollar, from early highs of 1.2220 and 0.9768, respectively. If the aussie extends its downtrend, it is likely to find support around 1.20 against the kiwi and 0.96 against the loonie.

Against the U.S. dollar and the euro, the aussie dropped to 5-day lows of 0.7136 and 1.6372 from early highs of 0.7171 and 1.6297, respectively. The next possible downside target for the aussie is seen around 0.70 against the greenback and 1.65 against the euro.

The aussie slid to a 4-day low of 112.20 against the yen, from an early high of 112.77. On the downside, 110.00 is seen as the next support level for the aussie.

Looking ahead, U.S. building permits for February, U.S. and Canada trade data for March, U.S. and Canada S&P Global PMI reports for April, U.S. new home sales for February and U.S. RCM/TIPP economic optimism index for May are slated for release in the New York session.