SYDNEY, Aug 2 (Reuters) - The Australian dollar slid on Tuesday after the country's central bank raised interest rates as expected but sounded a note of caution on further moves, sending bond yields lower.
The Aussie lost 0.9% to $0.6963, after hitting a six-week peak of $0.7048 overnight. Support comes in around $0.6960 with resistance at $0.7069.
The New Zealand dollar eased 0.3% to $0.6311, having also touched a six-week top of $0.6352 overnight.
Both had already run into some risk-aversion selling, particularly against the yen, as Beijing warned a visit to Taiwan by U.S. House of Representatives Speaker Nancy Pelosi would be "provocative".
The Reserve Bank of Australia (RBA) lifted its cash rate 50 basis points to 1.85%, but noted it was a difficult task to curb inflation while also keeping the economy on an even keel.
It reiterated that further hikes were likely, but in a change added that there was no pre-set path to policy.
That was taken as a dovish hint by markets and three-year bond futures jumped 11 ticks to 97.280. Bill futures for September added 5 ticks to 97.920 implying less chance of a half-point rise next month.
"It does suggest the RBA is still prioritising achieving a soft landing if inflation expectations remain anchored as they assess they are," said Ivan Colhoun, chief economist at NAB.
"NAB remains comfortable with its 2.85% cash rate forecast for end 2022 but continues to see a step down in the size of rate increases after this next meeting and a likely pause before the year end."
Swaps still imply rates will top around 3.30%, but that was down from 3.41% early on Tuesday and over 4% back in June.
"Some new elements of the RBA statement give the impression that the Board is getting closer to the point at which it will pause the tightening cycle," said Gareth Aird, head of Australian economics at CBA.
"We do not believe they are in a rush to take the policy rate much above their estimate of neutral of around 2.5%," he added, and expects rates to top out at 2.6%. (Editing by Shri Navaratnam)
