Australia's central bank kept interest rates steady at a record low 2.0 percent, in line with analysts' expectations, but the Australian dollar still pushed higher.
"There are a lot of factors influencing the currency. One of those is probably tomorrow, the GDP (gross domestic product) number for the first quarter. It's probably going to be very strong," Matthew Circosta, an analyst at Moody's Analytics, told CNBC. "But moving forward, you'll see that Aussie dollar weakness coming through in the next few months, because the U.S. is going to be raising interest rates."
All 24 economists polled by Reuters had expected the Reserve Bank of Australia (RBA) to be on hold, but eight respondents said interest rates could be reduced to 1.75 percent or lower by December, if non-mining business investments remain subdued.
Despite the RBA saying it believes further decline in the local currency was both likely and necessary, the Australian dollar strengthened 0.4 percent to trade at $0.7654, from $0.7628 prior to the data. The benchmark S&P ASX 200 index widened losses slightly to fall 1.3 percent, touching an eight-day low.
Traders may believe the RBA hasn't done enough to push the Aussie dollar lower, Stan Shamu, market strategist at IG, said in a note Tuesday. But he expects the rise in the local currency to reverse as it remains in a downtrend and the U.S. dollar has been appreciating.