Dollar softer ahead of RBA rates decision

THE Australian dollar is weaker from Friday as traders await a interest rate decision by the central bank tomorrow.

THE Australian dollar is weaker from Friday as traders await a interest rate decision by the central bank tomorrow.

At 5pm (AEDT) today, the Australian dollar was trading at 105.29 US cents, down from 106.76 cents on Friday.

However, the domestic currency is still heading for its biggest one-month gain since before it was floated in 1983.

So far in October 2011 the local unit has risen by 10.7 per cent, the largest gain since February 1973 - in the days when the government set the rate and it was appreciated by 10.9 per cent.

The Australian dollar has strengthened since the middle of last week on expectations that European leaders would find a solution to the eurozone debt crisis.

A deal was reached on Thursday to convince banks to take a 50 per cent writedown on Greek debt and to increase the regions's bailout fund to one trillion euros ($A1.33 trillion).

St George senior economist Jo Heffernan said on Monday that traders were positioning themselves ahead of the Reserve Bank of Australia's (RBA) regular monthly board meeting and interest rate decision on Tuesday.

Eleven of the 17 economists surveyed by AAP say the RBA will cut the cash rate from 4.75 per cent to 4.5 per cent when its board meets on November 1.

Ms Heffernan said St George was expecting a rate cut tomorrow.

"I think it's such a close call and it's certainly not a done deal," she said.

"Even if they do cut, I think it's probably a wait-and-see for what happens for the next rate move.

"I don't think it would signify the start of a deep cycle of interest rate cuts unless we saw things deteriorate significantly in Europe."

Since 7am (AEDT) today, the local unit traded between 105.02 US cents and 107.17 cents.

The RBA's trade weighted index was at 76.9 on Monday, down from 77.3 on Friday.