The Australian dollar staged a broad rally on Tuesday as the market trimmed crowded bearish positions after the Reserve Bank of Australia (RBA) surprised some by not cutting interest rates at its monthly policy meeting.

The Aussie jumped more than 50 pips to a session high of $0.7845. Oddly, it started to climb moments before the RBA announced the decision at 0330 GMT.

Interbank futures fell sharply, with the March contract suffering the biggest blow. It skidded 13 ticks to 97.755. The debt market still has 50 basis points worth of cuts priced in over the next 12 months.

The RBA said it was appropriate to hold the cash rate steady at a record low 2.25 per cent for the time-being, having just cut last month.

“Further easing of policy may be appropriate over the period ahead...the board will further assess the case for such action at forthcoming meetings,’’ the RBA said in a brief post-meeting statement.

The Aussie last traded at $0.7829. Against the yen, it bounced to 93.76, from around 93.05. It also climbed to NZ$1.0397, from NZ$1.0330.

“It’s what you’d expect to see, with markets not getting the rate cut,’’ said Michael Blythe, chief economist at Commonwealth Bank.

“People will now sit back and reassess. We only need one more piece of weak data to see markets put back in an easing for April, and certainly by May.’’

Indeed, analysts at Barclays said given that markets have only pushed back expectations of an easing, rather than remove the chance altogether, any gain in the Aussie dollar is likely to be short lived.

Australian government bond futures also fell, with the three-year bond contract shedding 7 ticks to 98.150. The 10-year contract was 6 ticks lower at 97.490.

The New Zealand dollar firmed in tandem with its Antipodean cousin, reaching a session high around $0.7547. It was last up 0.4 per cent on the day at $0.7540.

In the near term, the kiwi could extend gains if global dairy prices continue to climb at an auction later in the day. Sellers seen above $0.7600 are expected to limit any significant upside.

New Zealand government bonds slipped, nudging yields up to 2.5 basis points higher along the curve.

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