Australian Dollar Rises As RBA Hikes Key Rates By 25 Bps

(RTTNews) - The Australian dollar strengthened against other major currencies in the Asian session on Tuesday, after the Reserve Bank of Australia raised its benchmark rate for the first time since November 2023 as inflation picked up materially.

The policy board governed by Michele Bullock decided to lift the cash rate target by 25 basis points to 3.85 percent.

"The Board judged that inflation is likely to remain above target for some time and it was appropriate to increase the cash rate target," the bank said in a statement.

Policymakers said they are focused on its mandate to deliver price stability and full employment and will do what it considers necessary to achieve that outcome.

The board observed that inflationary pressures picked up materially in the second half of 2025.

Data from the Australian Bureau of Statistics showed that the total number of building permits issued in Australia was down a seasonally adjusted 14.9 percent on month in December, coming in at 15,542. That missed expectations for a decline of 6.4 percent following the 15.2 percent jump in November.

On a yearly basis, permits climbed 13.3 percent, easing from 20.2 percent in the previous month.

Asian stock markets traded higher as traders cheer signs of de-escalating tensions between the U.S. and Iran amid reports Iran is prepared to negotiate with the U.S. over its nuclear program. U.S. President Donald Trump also announced that he has reached a trade deal with India.

A report also showed manufacturing activity in the U.S. unexpectedly expanded for the first time in 12 months in January.

Meanwhile, traders seemed somewhat reluctant to make more significant moves ahead of the release of the closely watched monthly US jobs report on Friday.

In the Asian trading today, the Australian dollar rose to a 1-1/2-year high of 109.35 against the yen, nearly a 1-year high of 1.6797 against the euro and nearly a 5-year high of 0.9605 against the Canadian dollar, from yesterday's closing quotes of 108.14, 1.6970 and 0.9506, respectively. If the aussie extends its uptrend, it is likely to find resistance around 109.00 against the yen, 1.64 against the euro and 0.97 against the loonie.

Against the U.S. and the New Zealand dollars, the aussie advanced to 4-day highs of 0.7034 and 1.1648 from Monday's closing quotes of 0.6949 and 1.1581, respectively. On the upside, 0.71 against the greenback and 1.17 against the kiwi are seen as the next resistance levels for the aussie.

Looking ahead, U.S. Redbook report and U.S. RCM/TIPP economic optimism index for February are slated for release in the New York session.