The Australian dollar strengthened against other major currencies in the Asian session on Tuesday, following the Reserve Bank of Australia's (RBA) widely anticipated 25 basis point interest rate drop.

The RBA lowered its benchmark rate by a quarter-point as upside risks to inflation eased but policymakers remained cautious on prospects for further policy easing.

The policy board of the RBA governed by Michele Bullock decided to reduce the cash rate target by 25 basis points to 4.10 percent. The decision came in line with expectations.

The interest rate paid on Exchange Settlement balances was cut to 4 percent.

"In removing a little of the policy restrictiveness in its decision today, the Board acknowledges that progress has been made but is cautious about the outlook," RBA said.

The RBA's post-meeting press conference is currently the focus of traders, as remarks made by Governor Michele Bullock could have an impact on the AUD.

Asian stock markets reacted positively to easing geopolitical tensions after U.S. President Donald Trump's decision to open talks with Russia on ending the war with Ukraine without a European presence. Concerns about the potential impact of higher tariffs by the U.S. limited markets' upside.

Crude oil prices were also traded higher on the prospect of peace in Eastern Europe, as talks to end the war between Russia and Ukraine are expected to begin in Saudi Arabia later in the week. West Texas Intermediate (WTI) Crude Oil Futures for April settlement edged up 0.08 percent to close at $71.33 a barrel.

In the Asian trading today, the Australian dollar rose to 4-day highs of 1.1142 against the NZ dollar and 96.79 against the yen, from yesterday's closing quotes of 1.1090 and 96.25, respectively. If the aussie extends its uptrend, it is likely to find resistance around 1.12 against the kiwi and 99.00 against the yen.

The aussie advanced to a 6-day high of 1.6441 against the euro, from a recent 4-day low of 1.6521. The aussie may test resistance around the 1.62 region.

Against the U.S. dollar, the aussie edged up to 0.6368 from a recent 4-day low of 0.6334. On the upside, 0.65 is seen as the next resistance level for the aussie.

The aussie climbed to 0.9035 against the Canadian dollar, from Monday's closing value of 0.9016. The next possible upside target for the aussie is seen around the 0.914 area.

Looking ahead, Germany's ZEW economic confidence survey results for February are due to be released at 5:00 am Et in the European session. The economic sentiment index is expected to rise notably to 19.9 in February from 10.3 in January.

In the New York session, Canada CPI data for January, U.S. NY Empire State manufacturing index for February and U.S. NAHB housing market index for February are slated for release.

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