The Australian dollar fell on Tuesday as the Reserve Bank of Australia lifted rates but modified its outlook, raising investor projections that rate hikes are coming to a halt. Meanwhile, the dollar strengthened as the rally in risky currencies from last week took a break.

As anticipated, the RBA ended four months of stable policy on Tuesday by raising interest rates by 25 basis points; but the bank changed its rhetoric regarding the outlook.

Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, stated on Monday that there is probably still more work to be done by the American central bank to contain inflation.

It will be important to see whether Fed Chairman Jerome Powell sticks to the more dovish tone he established during the Fed's policy meeting last week when Powell speaks on Wednesday and Thursday.

The dollar index advanced by 0.1% to 105.38, post edging up by 0.2%, but stayed close to the lowest level at 104.84 hit on Monday.

EUR/USD dipped 0.06% at $1.0710, falling from the highest level touched in 8 weeks at $1.0756 on Monday.

GBP/USD dipped 0.04% at $1.23345 slightly below the seven-week peak it reached on Monday of $1.2428.

USD/JPY touched at 151.74 per dollar last week, advancing toward the October 2022 lows that prompted multiple rounds of dollar-selling intervention.