The move was widely expected given signs that the domestic economy was holding up in the face of global headwinds.
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The Reserve Bank of Australia said the pace of economic growth should pick up gradually in the next few years without inflation being a problem.
It was too early to see if markets turmoil would scuttle Australia's moderate pace of growth, the country's top central banker said.
Japan's negative rate policy should have weakened the yen, but instead it's spurred a rally as appetite to use the currency to fund other bets wanes.
The dollar rebounded on Friday after data showed a pickup in U.S. wages, suggesting rates hikes are more likely to happen in 2016.
The U.S. dollar fell against the euro and yen on Tuesday after a drop in oil prices suggested U.S. inflation would stay low.
Asia markets closed mostly lower on Tuesday, weighed by declines in the energy sector as oil prices continued to tumble.
Paul Bloxham, chief economist for Australia and New Zealand at HSBC says the RBA still has scope to cut rates given low inflation.
Strength of Aussie dollar can prove to be a concern in the long term, says Jonathan Cavenagh, head of EM Asia forex strategy at J.P. Morgan.
Asia markets closed mixed, with indexes in Australia, Japan and Korea extending Friday's gains on the back of the BOJ's surprise rate move.
Australia's shares are set to enter a bear market, but investors will likely emerge with a profit if they hang on for a year, Credit Suisse said.
Australian banks stocks enjoyed an oversold bounce after the Fed hike, but are likely to remain in a range-bound trade for the next 12 months, says Gary Burton, market technical analyst at FP Markets.
The U.S. dollar lost some ground on Wednesday, after the Federal Reserve decide to raise interest rates for the first time in nearly a decade.
Asian markets closed mostly down after selling off on Monday, with some energy stocks seeing a rebound after oil prices rose in the U.S. session.
Australia is attempting to let the air out of housing without deflating a vital source of economic growth or stressing indebted households.
Chinese markets closed higher on Wednesday on the back of rumors of an upcoming incentive to boost China's property market.
Australia's economy grew a shade more than expected in the third quarter as a sharp increase in mining activity boosted net exports.
Trading the Australian dollar was a classic play for those who didn't have direct access to China, and a sure-fire winner on the short side.
A rebound in Australia's net export contributions will be the big factor in GDP today, says David de Garis, senior economist at National Australia Bank.