Dollar dips on rate rise pause expectations

The Reserve Bank of Australia (RBA) raised the cash rate by 25 basis points to 3.75 per cent following its monthly board meeting.

At 5pm (AEDT), the Australian dollar was trading at 91.33 US cents, down from yesterday's close of 91.53 US cents.

During the domestic session, the local unit traded in a range of 91.05 US cents and 91.86 cents.

RBA governor Glenn Stevens said the monetary policy stimulus put in place during the global economic downturn - when the cash rate was lowered to three per cent - was being wound back.

"With the risk of serious economic contraction in Australia having passed, the (RBA) board has moved at recent meetings to lessen gradually the degree of monetary stimulus that was put in place when the outlook appeared to be much weaker,'' Mr Stevens said.

"These material adjustments to the stance of monetary policy will, in the board's view, work to increase the sustainability of growth in economic activity and keep inflation consistent with the target over the years ahead.''

A senior corporate trader with online currency trader EasyForex, Francisco Solar, said the RBA acted as expected but the financial markets were disappointed with the statement accompanying the decision.

"Pretty much there was a consensus for a 25-basis point hike,'' Mr Solar said.
"Unfortunately, we had pretty much an unchanged statement or outlook for the Aussie economy, which implies that we are on a wait-and-see approach.

"Markets are somewhat disappointed there was not a clear road map in regards to rate hikes down the track.''

At 5pm (AEDT), the Australian dollar was trading at 79.83 yen, up from Monday's close of 78.92 yen and at 60.88 euro cents, up from 60.83 euro cents.