The Australian dollar fell on Wednesday as comments from the Reserve Bank of Australia after it raised interest rates cast doubt on speculation of another increase in rates by the end of the first quarter of next year.
Still, the Aussie held just above $0.7700 as most analysts said the central bank kept its tightening bias and remained concerned about significant risks of inflation, although for some analysts the tone was less hawkish than its previous stance.
The Aussie initially rose to a high of $0.7751 - still below its offshore high of $0.7762 - shortly after the central bank raised rates a quarter point to 6.25 percent, as expected, but then the local currency pared its gains to trade lower.
"From here I'd probably see a little bit of further weakness, but it's only going to move down fairly slightly," said Jonathan Cavenagh, currency strategist of Westpac Banking Corp.
He also said typically after a widely expected rate hike investors unwind "long" positions over the following few weeks. A "long" position is effectively a bet a currency will rise. Commonwealth Bank of Australia senior currency strategist Richard Grace said: "You are going to need a fresh round of economic data to push (the Aussie dollar) higher, so I suspect we may have seen the peak in the Aussie for now."
At 4 pm (0500 GMT) the Aussie dollar was quoted at $0.7714/18 compared with $0.7735/37 here late on Tuesday, according to Reuters data. The Aussie dollar is still about 3 percent higher on $0.7415 touched just over four weeks ago.
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