The Australian dollar gained against the greenback but lost ground versus the yen after the Bank of Japan agreed an "open-ended" commitment to ending deflation through asset purchases and a 2 per cent inflation target.
The moves, although expected, sent the Aussie to a session low of ¥93.78 from ¥94.79 before the announcement.
It was the first time in nearly a decade that the BoJ has taken easing measures at two consecutive board meetings.
While strategists said the BoJ wasn't as aggressive as expected the yen should resume its recent weakening trend.
"Ultimately, our currency strategists expect yen weakness to continue. This view suggests that Japanese investors will continue to step in and buy Australian dollar bonds once a new, higher range in the Australian dollar against the yen is established," said Alex Stanley, a strategist at Commonwealth Bank of Australia.
At 4.20pm AEDT the Australian dollar was buying $US1.0553, up from $US1.0517 late Monday and above a session low of $US1.0505.
"We expect the AUD/USD to trade in a relatively symmetrical and narrow range for the rest of the quarter reflecting countervailing forces before grinding lower over the remainder of the year," said strategists at Barclays.
For Aussie dollar traders the focus now switches to fourth-quarter inflation data due on Wednesday and whether it is low enough within the Reserve Bank of Australia's 2-3 per cent target band to allow another cut.
The next Reserve Bank of Australia rate decision is due February 5.
Financial markets are pricing in about a 38 per cent chance of another quarter-point reduction - adding to 1.75 percentage points of cuts since November 2011.
Consumer prices are likely to have risen at a relatively benign pace of 2.4 per cent a year in the fourth quarter - up from 2.0 per cent in the third quarter, according to a Dow Jones poll of 18 economists.
"In the context of recent trends middle-of-the-band inflation would not give the RBA cause to cut rates in February," said Commonwealth's Mr Stanley.
"But we'd suggest risks are to the downside for the core rate. Ultimately softer data and global risks should see the market hold onto pricing for up to 50 basis points of further easing."
