MUFG Research discusses its reaction to this week's RBA policy decision.
"The main macro surprise overnight was the RBA’s decision to deliver a smaller than expected rate hike. It marks a change from the recent run of hawkish policy updates from other G10 central banks. The RBA delivered a dovish policy surprise by hiking rates by 25bps rather than 50bps. It follows four consecutive 50bps hikes and brings total policy tightening to 250bps this year," MUFG notes.
"The Australian dollar initially weakened following the RBA’s dovish policy surprise falling to an intra-day low of 0.6451 but has since climbed back above the 0.6500-level amidst the broad-based US dollar sell-off. A slower pace of RBA hikes should make the Australian dollar relatively less attractive going forward all else being equal," MUFG adds.