Aussie is most profitable major currency after unexpected RBA decision

Australian dollar rose widely on Tuesday for the fourth straight session, hitting three-week highs and leading major currencies higher after the unexpected decision by Reserve Bank of Australia to raise interest rates by 25 basis points, extending the path of policy tightening to combat record inflation.

As Australian rates hit 11-year highs, markets are still betting on upcoming rate hikes, in turn boosting Aussie's standing against rivals.

AUD/USD rose 1.1% to 0.685, the highest since May 16, with a session-low at 0.6609, after rallying 0.2% yesterday, the third profit in a row. 

Highest Performing Currency

Aussie led major currencies higher following the bullish decision by the RBA.

Aussie hit three-week high against US dollar, and a two-month high against euro, and a four-week high against both the UK pound and the Swiss franc, and a six-month high against yen, and a two-month high against the Canadian dollar. 

RBA

Unexpectedly, the Reserve Bank of Australia voted to increase interest rates by 25 basis points, while markets expected no change in interest rates, sending them to 4.1%, the highest since April 2012. 

The RBA said there might be a need for further policy tightening in order to bring inflation down to 2-3%, while the size of upcoming policy tightening will depend on data. 

The RBA noted increased risks of inflationary pressures, which prompted it to accelerate policy tightening to bring prices under control.