Australia's central bank cut its cash rate a quarter point to an all-time low of 1.5 percent on Tuesday, the second easing this year as it seeks to defend the economy from deflation and restrain a too strong currency.

The local dollar did initially retreat on the Reserve Bank of Australia's widely expected move. But it quickly rebounded as investors anticipated easing by other central banks, underlining the challenge of keeping the currency down in a world where negative rates are now commonplace.

"The Reserve Bank is clearly on a mission to avoid the near-zero inflation rates that many similar countries have," said Shane Oliver, chief economist at AMP Capital Investors. "With the inflation numbers so low and the risk that if they didn't cut that the Aussie dollar would have been 76-77 (US cents) by now, they felt they probably had to act."

The Aussie was last trading at $0.7528, having been as low as $0.7486 at one stage. That resilience is one reason the market is pricing a further rate cut to 1.25 percent.

Interbank futures imply a 68 percent probability of a further easing by December. Likewise, yields on three-year government debt dropped to 1.39 percent, making it cheaper than borrowing overnight.

Data came out last week showed consumer price inflation slowed to 17-year lows in the June quarter while underlying inflation hit an all-time trough of 1.5 percent.