Australian dollar slips as RBA hikes rates in a split decision

By Wayne Cole

SYDNEY, Nov 3 (Reuters) - The Australian dollar slipped on Tuesday after the country's central bank lifted interest rates for a fifth time this year, but in a narrower call than many expected with three of the nine board members against a hike.

The Aussie eased 0.2% to $0.6986 , having slipped 0.5% overnight. The failure to hold above the 200-day moving average of $0.7058 turned technicals bearish and risked a retreat to $0.6895.

Wrapping up its November policy meeting, the Reserve Bank of Australia board voted to raise its cash rate by 25 basis points to 4.85%, highs not seen since 2008.

The move had been widely expected given core inflation in the third quarter had picked up to 3.7%, even further above the central bank's target range of 2% to 3%.

Markets now imply a roughly 24% chance of another move to 5.10%, down from 40% before the announcement. Most analysts had already assumed the RBA would be reluctant to tighten that far and risk a recession.

"The RBA sounded more confident that monetary policy is now sufficiently tight than in August as it described financial conditions as restrictive rather than 'somewhat restrictive,'" said Marcel Thieliant, head of Asia-Pacific economics at Capital Economics.

"Accordingly, we believe that the Bank is now done tightening though it probably won't loosen policy until the end of next year."

A separate RBA update on the economic outlook saw its inflation forecasts raised "materially" and staying high for longer, even assuming interest rates remained around current levels for a year or more.

Australian 3-year bond futures edged up 3 ticks to 95.20 as investors pared back the chance of further tightening. Yields on 10-year bonds were near two-month lows at 5.145% following a rally in US Treasuries.

Speculators had already pared long Aussie positions overnight in part on worries the RBA might surprise by not hiking, as New Zealand's central bank did last week.

The kiwi dollar held at $0.5614 , after falling 0.3% overnight. Major support lies at the recent trough of $0.5566 and a breach would open the way to $0.5485.