The Australian dollar slipped on Tuesday and was seen likely to ease further after failing to hold on to gains made on the Reserve Bank of Australia minutes, which highlighted the risk of another rate hike.
The RBA said its decision to not raise rates this month was "finely balanced" and that it could not wait "indefinitely" to tighten given long-term risks to inflation, bolstering the case for a November rate hike.
The Aussie climbed a third of a cent to a session high at around $US0.9961 in reaction to the central bank minutes, but then retreated as investors were reluctant to wager too much on a policy move, having been badly burned by the RBA decision to skip a hike at its October 5 meeting.
At the local close, the Australian dollar was at $US0.9849, down from New York's $US0.9890. However, it remained not far from a 28-year peak of $US1.0004 scaled last Friday.
Initial support for the Aussie was seen at Monday's low near $US0.9800 followed by the October 12 low at around $US0.9767.
"We still like it on dips and we suspect we may well get a dip over the next 48 hours or so. $US0.9750-0.9775 is probably not a bad level to buy the dips," said Westpac Bank analyst Jonathan Cavenagh.
Implied rates showed the market was priced for a 40 per cent chance of rates rising to 4.75 per cent in November, from 4.5 per cent now. Over the next one year, the market sees rates rising another 49 basis points.
Reuters