The uncertain outcome of Saturday's federal election heightened fears Australia could be consigned to three years of minority government and policy paralysis.
Japanese markets on Tuesday reversed early losses of as much as 1.13 percent to trade higher as rest of Asia close mixed.
Keeping rates steady this month was consistent with sustainable economic growth returning to target over time, Australia's c.bank said on Tuesday.
Commonwealth Bank's Gareth Aird forecasts Australia's unemployment rate for May could tick up to 5.8 percent and that the RBA might cut in August.
The dollar added to earlier losses on Wednesday after the Federal Reserve left interest rates unchanged, as was widely expected.
The Australian dollar strengthened on Tuesday after the Reserve Bank of Australia kept interest rates on hold.
Asia markets ended up on Tuesday, taking a generally positive view of comments from Yellen and from central bank calls in Australia and India.
Konstantinos Venetis, global economist at Lombard Street Research, comments on the decision by the Australian central bank to hold interest rates.
RBA's decision to hold is most likely because it wants to see the impact of last month's rate cut on inflation, Moody's Analytics' Emily Dabbs says.
Australia experienced strong GDP growth but low inflation, which leaves room for the RBA to cut rates later, says HSBC's Paul Bloxham.
Nomura Australia's Andrew Ticehurst says the AUD/USD pair should be below $0.70, but it is unlikely that the RBA will cut rates.
This week investors will watch China trade and inflation numbers, plus rates decisions from Australia, India, South Korea and New Zealand.
The U.S. dollar hit its lowest level in two weeks against the yen after Japan delayed a sales tax hike for longer than expected.
Australia recorded its fastest annual pace of growth in three years in Q1, which could keep the RBA on hold at its meeting next week.
The dollar was mostly flat against a basket of major currencies after U.S. data failed to support expectations for a June or July Fed hike.
The U.S. dollar rose against the yen for a second straight day and hovered near its highest level in roughly 10 weeks against the euro.
Asia markets mostly closed higher on Wednesday, with Hong Kong leading gains and several major indexes advancing more than 1 percent each.
Asian markets fell on Tuesday, led by declines in Japan and China, as investors await further cues from the Fed ahead of its June policy meeting.
Bets against Australia's Big Four banks have piled up amid rising concerns that the country's property prices could be about to fall off a cliff.
The dollar rallied to a three-week high against the euro and a basket of currencies on Wednesday.