© Reuters.

By Sam Boughedda

Investing.com — The Australian dollar took a plunge on Tuesday after the Reserve Bank of Australia took on a more dovish tone than expected.

The currency started its decline after the RBA’s meeting, where it did not pivot to the hawkish stance that many analysts and traders had predicted. 

The central bank said inflation was still too low. However, it also dropped a key bond yield target following a bond market sell-off last week, with the outlook for the Australian economy looking more positive in recent weeks.

The RBA also removed previous suggestions that rates were unlikely to rise until 2024, suggesting a slightly more hawkish tone. However, it wasn’t as hawkish as market participants had hoped, which caused the to continue to sell-off into the European and U.S. sessions.

As of midday in the U.S., the pair is down 1.25%, trading around the 0.7424 mark, after a roughly 100 pip fall.

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