The Australian dollar was the clear outperformer in an otherwise dismal session in Asia on Tuesday, after the Reserve Bank of Australia (RBA) left interest rates on hold in its first policy meeting of the year.
The currency (AUD) surged 1.7 percent against the U.S. dollar to $0.8896, levels not seen in almost three weeks, and jumped 1.8 percent versus the yen.
The RBA kept its cash rate at a record low of 2.5 percent and said the current monetary policy was appropriate. While the decision was widely expected, analysts say the removal of the "easing bias" from its statement was the trigger for Aussie's huge rally.
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"The RBA meeting was significant because it removed its lose easing bias and showed no concern around emerging markets or the AUD being uncomfortably higher," Chris Weston, Chief Market Strategist, at trading firm IG.
"The spike higher in the AUD against all G10 pairs was significant (with AUD/USD rallying over one cent) and anyone looking to sell the AUD in part of a central bank divergence trade has closed out rather quickly today," he added.
The change in the central bank's easing stance is significant for the Aussie dollar, as the RBA has, for the most part of 2013, publicly voiced its desire for a weaker currency in hopes of boosting the country's economic growth.
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Analysts say the prospect of higher interest rates could also bode well for the currency, which lost 15 percent of its value against the greenback last year.