By Gina Lee

Investing.com – The dollar was up on Tuesday morning in Asia, remaining below recent highs as the Reserve Bank of Australia (RBA) led key central banks in handing down their policy decisions.

By 11:50 ET (03:50 GMT), the that monitors the greenback against other currencies increased 0.04% to 93.918

This pair fell 0.05% to 112.92.

This pair fell 0.31% from 0.7501 to 0.7501, and was on the decline by 0.10% at 0.7174.

Both the pair grew by 0.5% to 6.4005, while they fell by 0.16% each to 1.3651.

As it issued its earlier policy decision, the Reserve Bank of New Zealand kept its November interest rates at 0.10%. The decision comes as the central bank failed to defend its yield target as bonds sold off over recent sessions, and the Reserve Bank of New Zealand is likely to track its Antipodean counterpart’s moves in its next policy decision.

The RBA decision could be used by other central banks to guide their policies. Surging inflation is a common problem for all three central banks.

“The (Fed’s) elephant in the room are headline and underlying inflation. They are both higher than they anticipated. According to Standard Chartered’s G10 FX Steve Englander, we expect the Fed (OTC:), to declare that it will act quickly if inflation doesn’t move toward target levels after asset tapering stops. However, it expects inflation not to drop as supply constraints ease.” Reuters.

We believe investors will view this as an advance in the timing of Fed rate increases. The implied threat by the Fed of interest rates rising to zero, but with a discount on inflation optimism, we expect FX markets will react. All of this adds up in a dollar positive combination of higher real rate and greater risk-off position.

Trader positioning is indicative that bets are placed on higher rates by traders as speculators rush in to reduce the yen.

Kit Juckes from Societe Generale told Reuters, “That’s a betting that interest rate trends won’t continue to move against yens as they rise elsewhere in particular the U.S.”

The majority of people believe that the bond sale-off is still not complete. In a lesser degree, it’s also a wager that the risk sentiment will endure this experience.