The Australian dollar retreated against its major counterparts in the Asian session on Tuesday, after the Reserve Bank of Australia raised interest rate by a modest 25 basis point for the second straight meeting.

The policy board of the RBA decided to lift the cash rate target by 25 basis points to 2.85 percent from 2.60 percent.

The board has increased interest rates materially since May to establish a more sustainable balance of demand and supply in the domestic economy to help return inflation to target, the bank said in the statement.

The bank reiterated that policymakers expect to increase interest rates further over the period ahead.

The size and timing of future interest rate increases will continue to be determined by the incoming data and the Board's assessment of the outlook for inflation and the labor market.

The latest survey from S&P Global showed that Australia's manufacturing sector continued to expand in October, albeit at a slower pace, with a manufacturing PMI score of 52.7.

That's down from 53.5 in September, although it remains above the boom-or-bust line of 50 that separates expansion from contraction.

The aussie retreated to 0.6408 against the greenback and 0.8709 against the loonie, off its early 4-day highs of 0.6447 and 0.8756, respectively. The next possible support for the aussie is seen around 0.62 against the greenback and 0.86 against the loonie.

The aussie eased to 1.5446 against the euro and 94.99 against the yen, following its prior fresh 3-week high of 1.5364 and near a 2-week high of 95.56, respectively. The aussie is seen finding support around 1.57 against the euro and 92.00 against the yen.

The aussie touched 1.0970 against the kiwi, its lowest level since July 4. The aussie is likely to challenge support around the 1.06 mark.

Looking ahead, German import and export prices for September, U.K. nationwide house price index and Swiss manufacturing PMI for October will be featured in the European session.

U.S. construction spending for September and ISM manufacturing index for October will be out in the New York session.

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