Aussie declines 2% after RBA policy decisions

The Australian dollar fell against most major rivals following the Reserve Bank of Australia decisions while the US dollar strengthened against rivals.

The Reserve Bank of Australia decided to increase interest rates by 25 basis points today as expected by market analysts to 3.60%, the highest since May 2012, from 3.35%5 at the previous meeting.

It's the tenth rate hike in a row in order to control inflation in Australia, which showed signs of response recently to the RBA's measures.

AUD/USD fell 2.1% today as of 19:13 GMT to 0.6591. 

The Dollar

Ahead of the Senate Banking Committee, Powell told senators they should expect further policy tightening with rate hikes.

Powell also said the Fed hasn't won its battle against inflation yet, which remains considerably higher than 2%.

He noted that inflation calmed down in January with some signals of weakening in services except housing, possibly because of the warmer climate. 

However, a full review of the last quarter shows that inflationary pressures remain rather higher than expected in previous meetings. 

US economic data proved stronger than previous analysis, which shows that inflation interest rates might be higher than initial expected. 

Markets now estimate the Fed will raise interest rates to between 5.5% and 5.75% by September. 

On trading, the dollar index rose 0.7% to 105.1 as of 19:06 GMT, with a session-high at 105.2, and a low at 104.1.