Australian Dollar Rises On RBA's Surprise Rate Hike

The Australian dollar strengthened against other major currencies in the Asian session on Tuesday, after the Reserve Bank of Australia unexpectedly raised its key interest rate today saying inflation at 7 percent remains too high, and some further policy tightening may be required in future to bring the price growth rate to target.

The RBA Board, led by Governor Philip Lowe, raised the cash rate target by 25 basis points to 4.10 percent. Economists had expected the bank to leave the rate unchanged. The key interest rate is now at its highest level since early 2012.

The central bank also increased the interest rate paid on exchange settlement balances by 25 basis points to 4 percent.

Traders await Wednesday's speeches from RBA Governor Philip Lowe and Deputy Governor Michele Bullock to gain hints for future rate hikes from the RBA.

In the Asian trading today, the Australian dollar rose to a 2-month high of 1.6059 against the euro and nearly a 6-month high of 93.14 against the yen, from yesterday's closing quotes of 1.6178 and 92.35, respectively. The aussie may test resistance around 1.57 against the euro and 95.00 against the yen.

Against the U.S., the New Zealand and the Canadian dollars, the aussie advanced to a 3-week high of 0.6681, nearly a 4-month high of 1.0969 and a 2-week high of 0.8955 from yesterday's closing quotes of 0.6617, 1.0901 and 0.8895, respectively. If the aussie extends its uptrend, it may find resistance around 0.68 against the greenback, 1.11 against the kiwi and 0.91 against the loonie.

Meanwhile, the New Zealand dollar, the other Anti-podean currency also rose against its major rivals after the rate decision.

The NZ dollar rose to nearly a 2-week high of 1.7578 against the euro, from yesterday's closing value of 1.7642. On the upside, 1.70 is seen as the next resistance level for the kiwi.

Against the U.S. dollar and the yen, the kiwi advanced to a 4-day high of 0.6097 and a 1-week high of 85.11 from yesterday's closing quotes of 0.6069 and 84.71, respectively. If the kiwi extends its uptrend, it is likely to find resistance around 0.64 against the greenback and 87.00 against the yen.

Looking ahead, construction PMI reports for May from European economies and U.K., Eurozone retail sales data for April are due to be released in the European session.

In the New York session, Canada building permits for April, Canada Ivey's PMI data for May and U.S. Ai Group industry index for May are slated for release.