An Australia Dollar note is seen in this illustration photo June 1, 2017.
An Australia Dollar note is seen in this illustration photo June 1, 2017. Reuters / THOMAS WHITE

The Australian dollar rose on Tuesday after the central bank flagged more rate hikes were on the way, but the uptick was restrained by lower commodity prices, while the Japanese yen languished near a 24-year low.

The Aussie was 0.3% higher at $0.69675, extending the previous day's small gains, after Reserve Bank of Australia (RBA) Governor Philip Lowe signalled a lot more policy tightening ahead.

Lowe said rates were still "very low" and it was important that higher inflation did not feed into public expectations and wage claims.

RBA minutes from its June meeting, at which the central bank raised rates by a larger than expected 50 basis points, highlighted the central bank's concerns about inflation.

Still, the Aussie dollar is facing pressure from lower commodity prices, and analysts at CBA said further falls in iron ore prices would weigh on the currency in the near term while slowing global growth would be a drag in the longer term.

"We forecast AUD/USD will spend most of the next twelve months in a 0.60-0.70 range," they said in a note.

Elsewhere the Japanese yen remained under pressure at 135.1 yen per dollar, not far off a 24-year low of 135.58 yen hit early last week, after the Bank of Japan on Friday dashed any mild expectations of a change in policy and renewed its commitment to ultra-easy monetary settings.

The euro was at $1.0519, a fraction higher, as Monday's remarks from European Central Bank President Christine Lagarde about the need to nip the risk of financial fragmentation between euro countries in the bud, eclipsed the negative drag of French President Emmanuel Macron losing his parliamentary majority.

Broadly higher risk sentiment across markets, with U.S. equity futures up about 1%, also supported the Aussie and the euro.

The dollar index, which tracks the greenback against six major peers, was a touch lower at 104.38. [MKTS/GLOB]

U.S. markets were closed on Monday for a holiday, but the major event for the dollar this week is Federal Reserve Chair Jerome Powell's semi annual two day report to Congress which kicks off on Wednesday.

Sterling was at $1.227, climbing from last week's over two-year low of $1.1934.

Bitcoin was at $20,500 having failed to break strongly above or below the psychologically significant $20,000 level in recent days.