Australia left interest rates on hold at 4.75% today, saying conditions were uncertain in Europe and the strong local dollar would help keep a lid on inflation.
'The exchange rate has risen significantly this year, reflecting the high level of commodity prices and the respective outlooks for monetary policy in Australia and the major countries,' said central bank governor Glenn Stevens.
'This will assist in containing pressure on inflation over the period ahead,' he added.
The Australian dollar spiked above parity with the US dollar in October for the first time since it was floated in 1983, and the Reserve Bank of Australia (RBA) said the nation's terms of trade were 'at their highest level since the early 1950s'.
There had been 'very strong' jobs growth in the past 12 months - with unemployment at 5.4% and record levels of participation - with wages growth accelerating and inflation likely to be little changed in coming quarters, it said.
'Following the Board's decision last month to lift the cash rate, and the subsequent increases by financial institutions, lending rates in the economy are now a little above average,' Stevens said. 'The Board views this setting of monetary policy as appropriate for the economic outlook,' he added.
The pause had been widely tipped by analysts after domestic growth slowed last quarter to financial crisis levels of 0.2% and euro zone finance worries were stoked by woes in Ireland and Hungary.
Stevens said 'concerns about the creditworthiness of a number of European governments have again become the main focus of financial markets,' with volatility increasing.
'At the same time, recent data suggest that the Chinese and Indian economies have continued to grow strongly and price pressures, particularly for food, have picked up in China as well as a number of other economies in Asia,' he said.
Australia's annual growth has eased to 2.7% due to slowing exports and a slump in commodity prices due to the bullish Australian dollar.
Australia, the first major western economy to raise interest rates after the global slump, has hiked its cash rate by 175 basis points since October 2009 as it rides a mining boom driven by Asian demand.
