The Australian dollar declined in Asian trading on Tuesday against a basket of global currencies, extending its losses for a second consecutive day against the US dollar and moving further away from a nearly two-month high, as profit-taking and correction continued following the Reserve Bank of Australia's policy meeting, which largely matched market expectations.

The RBA kept interest rates unchanged for a second consecutive meeting and reiterated its commitment to returning inflation to target over the medium term, while signaling that another rate hike remains an option if fresh inflationary risks emerge.

The Price

The Australian dollar fell around 0.3% against its US counterpart to 0.7039, from an opening level of 0.7058, after reaching a session high of 0.7063.

The Australian dollar ended Monday down 0.2% against the US dollar amid correction and profit-taking, after reaching a nearly two-month high of 70.78 US cents on Friday.

Reserve Bank of Australia

As widely expected, the Reserve Bank of Australia's monetary policy board decided on Tuesday to leave interest rates unchanged at 4.35%, their highest level since December 2024, marking the second consecutive meeting with no change.

RBA keeps interest rates unchanged for second consecutive meeting

The decision was unanimous among RBA board members and followed three rate hikes since the beginning of the year aimed at slowing the economy and bringing elevated inflation under control.

The RBA said it does not rule out another rate hike if fresh inflationary risks emerge, stressing that its primary focus remains returning inflation to its 2%-3% target range over the medium term.

The central bank said underlying inflation had eased to 3.6%, a better outcome than previously forecast, although it remains well above the target range.

The monetary policy statement also stressed that persistent geopolitical instability in the Middle East continues to put upward pressure on global energy prices and inflation.

Australian interest rates

Market pricing for a 25-basis-point RBA rate hike in September fell to below 50%.

Investors are awaiting further data on inflation, unemployment and wages in Australia to reassess those expectations.

RBA Governor Michele Bullock is due to speak shortly at a press conference on the latest monetary policy decisions and economic developments in the country.