Dollar treads water ahead of rate decision

DOLLAR unchanged, as currency traders sit on the sidelines ahead the central bank's interest rate decision.

THE dollar was virtually unchanged at noon, as currency traders sit on the sidelines ahead the central bank's interest rate decision at 2.30pm (AEDT).

At midday (AEDT), the local unit was trading at US98.79c, broadly level with yesterday's close of US98.78c.

Since 7am, the local unit traded between US98.76c and US99.01c.

This afternoon, the Reserve Bank of Australia (RBA) will have its board meeting and announce its decision on the cash rate.

All 15 economists surveyed by AAP have forecast the central bank to leave the overnight cash rate at 4.75 per cent.

The meeting follows weak economic data last week showing the Australian economy grew 0.2 per cent in the September quarter for an annual pace of 2.7 per cent and retail trade fell 1.1 per cent in October.

RBC Capital Markets senior currency strategist Sue Trinh said the dollar was treading water ahead of the interest rate announcement.

"The statement is going to be more interesting and we'll in particular be wanting to watch for any forward guidance as to the pace and extent of any further rate hikes next year."

She said for the rest of the week the market would be closely following developments on the European sovereign debt problems.

"At the moment the market seems pretty sanguine about developments ... and certainly the panic sentiment has abated somewhat," Ms Trinh said.

"Markets will be alert to any further announcements as to the Irish aid and, in particular, any commitment to the rest of the periphery, should they need it."

She expects the dollar to trade in a range between US98.50c and US99.20c this afternoon.

Meanwhile, the bond market was weaker at noon.

At midday on the ASX 24, the December 10-year bond futures contract was at 94.550 (implying a yield of 5.450 per cent), down from yesterday's close of 94.570 (5.430 per cent).

The December three-year bond futures contract was at 95.000 (5.000 per cent), down from 95.010 (4.990 per cent).