The Australian dollar rebounded on Tuesday after the country's central bank sounded upbeat about economic growth and inflation prospects at its first policy meeting of the year. The Australian dollar climbed 0.21 percent to $0.7676, not far from a three-month peak touched last week, from an earlier low of $0.7633.
The Reserve Bank of Australia (RBA) held interest rates at 1.5 percent on Tuesday, as expected, but said it sees consumer price inflation in 2017 to be above 2 percent and within the central bank's 2-3 percent inflation target band for the first time since the third quarter of 2014.
The Aussie did well against other currencies, rising 0.6 percent on the euro, 0.2 percent on the pound and 0.3 percent against the yen.
Across the Tasman Sea, the New Zealand dollar climbed 0.6 percent to a 12-week high as investors were heartened by a survey showing inflation expectations had jumped.
The Kiwi rose to $0.7367, from $0.7318, after the Reserve Bank of New Zealand (RBNZ) found two-year inflation expectations rose to 1.92 percent from 1.68 percent.
New Zealand government bonds gained, sending yields 8.5 basis points lower at the long end of the curve. Australian government bond futures rose, with the three-year bond contract up 3 ticks at 98.05. The 10-year contract rose 6.5 ticks to 97.27.
Governor Philip Lowe also played down recent soft economic data, expecting growth around 3 percent over the next couple of years. The commentary cemented views that further cuts in interest rates were unlikely in the near-term.
Indeed, investors scaled back expectations of interest rate cuts, with the futures market seeing only a 16 percent chance of a move lower by June. "Governor Lowe took this opportunity to reiterate that the RBA maintains its inflation forecasts and still expects growth to accelerate," said Greg McKenna, chief market strategist at AxiTrader.
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