The Australian dollar is lower after the Reserve Bank of Australia indicated that the cash rate could be cut again because the exchange rate is too high.
At 1700 AEDT on Tuesday, the local unit was trading at 94.77 US cents, down from 94.88 cents on Monday.
After its Melbourne Cup Day board meeting the RBA kept the cash rate at 2.5 per cent, but its statement was notable because it said the Australian dollar is "uncomfortably high".
After the announcement the currency fell almost half a US cent to 94.64 US cents.
RBA governor Glenn Stevens said that previous interest rate cuts were helping the weaker parts of the economy but a lower exchange rate is needed to help the economy rebalance away from one that is mainly driven by mining investment.
Forex.com research analyst Chris Tedder said it looks as if the RBA is keeping its options open on future interest rate decisions.
"If the Aussie dollar doesn't depreciate we may see the RBA cut rates again in an attempt to soften the blow from a high dollar to trade exposed sectors of the economy," he said.
"However, we have seen a pick-up in some areas of the economy in response to the RBA's massive easing cycle, particularly in consumer confidence and the residential property market, thus the bank can afford to wait on the sidelines for the time being."
The next focus for investors will be Thursday's release of local jobs figures for October, which are expected to show a small rise in the unemployment rate to 5.7 per cent.
There will also be further guidance on the RBA's thoughts on the economy on Friday when it releases its quarterly Statement on Monetary Policy.
At 1700 AEDT, the Australian dollar was at 93.37 Japanese yen, down from Monday's close of 93.69 yen, and at 70.20 euro cents, down from 70.35 euro cents.
Meanwhile, the Australian bond market was virtually unchanged despite bond futures prices getting a lift from the RBA announcement.
Westpac senior market strategist Damien McColough said the comments about the high currency led traders to believe that another interest rate cut is possible in the new year.
"The market has looked at the (words) "uncomfortably high" and decided that it wasn't particularly hawkish," he said.
"There was a bit of a concession on the other side that housing and equity markets have strengthened and the pace of demand outside the mining sector looks to have increased but that has a lot of uncertainty."
At 1630 AEDT on Tuesday, the December 10-year bond futures contract was trading at 95.905 (implying a yield of 4.095 per cent), level with the local close on Monday.The December three-year bond futures contract was at 96.850 (3.150 per cent), slightly down from 96.840 (3.160 per cent).