The Australian dollar has dropped to a three-week low after the central bank surprised economists with an interest rate cut.
At 1700 AEST, the currency was trading at 102.97 US cents, down from 103.60 US cents on Monday.
The Reserve Bank of Australia (RBA) announced on Tuesday it had cut the cash rate a quarter of a percentage point to 3.25 per cent at its October board meeting, in response to a worsening global economic outlook.
Commonwealth bank currency strategist Joseph Capurso said the Australian dollar fell sharply following decision.
"Even though market pricing was apparently skewed towards a rate cut the Aussie dollar dropped 60 to 70 basis points almost immediately and it has continued to trend down as London traders have come in," he said.
Futures traders had priced in an 80 per cent likelihood of a rate cut at the RBA's monthly board meeting on Tuesday, though only five of 17 economists surveyed by AAP last week predicted the move.
Mr Capurso said the currency was likely to drop further during the overnight session.
"The reaction has certainly been bigger than we thought and there is probably more to come."
"We think it will continue to fall, possibly as low as 102.20 US cents when New York opens up."
However, he said the fall was likely to be short-lived and the currency would start to rebound from Wednesday.
"I wouldn't see this as a change in trend for the Aussie, interest rates are still higher compared to many other places around the world and there is still that demand for Australia's triple-A sovereign bonds."
"So there is a lot to keep the Australian dollar up," Mr Capurso said.
