SYDNEY: The Australian dollar fell slightly on Tuesday after the Reserve Bank of Australia (RBA) maintained its cash rate at 4.35%, a level consistent with earlier hikes this year aimed at curbing persistent inflation.
The central bank noted that economic growth and consumer demand had moderated in response to tighter financial conditions, and the housing market had cooled.
Nonetheless, the RBA emphasized that inflation remains above target and the bank is prepared to tighten further if necessary. “A pause today allows the RBA to see how the earlier rate increases are affecting households, businesses, and the labour market, while keeping options open for future meetings,” said Stephen Smith, partner at Deloitte Access Economics.
Smith added that another hike later in 2026 remains a possibility, and the current outlook points to a higher likelihood of an increase rather than a cut. Investors had priced in a steady outcome this week, following softer data on inflation, consumer demand, and employment, with proposed tax changes on property also weighing on the housing sector.
Market expectations now assign roughly a 30% probability to a rate hike at the next RBA meeting in August, and a 60% chance that rates will rise one final time to a peak of 4.60%.
The Aussie currency slipped 0.3% to $0.7050, after rebounding almost 0.5% on Monday when optimism around a Middle East peace deal lifted risk sentiment. Support lies near the recent two‑month low of $0.6979, while resistance is around $0.7088 and $0.7200.
The kiwi dollar also fell 0.3% to $0.5803, having declined 0.1% overnight after facing resistance at $0.5865. Support is at last week’s trough of $0.5770.
Australian 10‑year bond yields rose 2 basis points to 4.831%, after a rally on Monday as oil prices fell.
“Inflation risks appear well priced,” said Adam Bowe, head of Australia Portfolio Management at PIMCO. “With medium‑term growth risks increasing, the RBA is now focusing on both sides of its mandate. Given 10‑year bond yields around 4.85%, we see considerable value in Australian duration.”
