The Australian dollar fell 0.25% to $0.7053 after the Reserve Bank of Australia raised its cash rate by 25 basis points to 4.1%. The decision was split 5-4-the narrowest vote since the RBA began publishing tallies-signaling growing internal caution.
The RBA cited a 'material risk' that inflation will remain above target longer than expected, citing Middle East instability as a potential driver of global and domestic price pressures.
Three-year Australian government bond yields dropped 7 basis points to 4.509%. Market pricing now assigns only a 30% chance of another hike in May.
The U.S. dollar strengthened broadly as oil prices surged amid the U.S.-Israel military campaign against Iran. The dollar index held near 99.89, up over 2% this month.
The Japanese yen weakened to 159.31 per dollar-within striking distance of 160-despite verbal intervention warnings from Tokyo. Bank of Japan Governor Kazuo Ueda noted accelerating underlying inflation ahead of its policy meeting.
The euro traded flat at $1.1499; sterling held at $1.33115 after recent gains.