Dollar down leading up to RBA interest rates decision

THE dollar was around a third of a US cent lower at noon (AEST), as traders await the Reserve Bank's interest rate decision.

THE dollar was around a third of a US cent lower at noon (AEST), as traders await the Reserve Bank's interest rate decision.

At midday, the dollar was trading at US107.22c, down from US107.53c yesterday.

Since 7am, the local unit traded between US107.1c and US107.35c.

Commonwealth Bank chief currency strategist Richard Grace said the dollar traded within a narrow range in the morning session.

"There's been a little bit of (US) dollar strength creeping through the market this morning which has led the Aussie and most currencies a little bit lower," he said.

"But the ranges are pretty modest. They haven't broken last night's ranges, for instance."

At 2.30pm (AEST), the Reserve Bank of Australia (RBA) is due to announce its decision on the cash rate following its monthly board meeting.

The central bank has recently hinted the cash rate may be on its way up, but is widely expected to leave the rate unchanged at 4.75 per cent in June.

Mr Grace said he did not expect much change in the central bank's tone in the statement accompanying its decision.

"The only additional comments that may come is some commentary from the softening of the US economy, but really I don't expect there to be a real change at all," he said.

"I don't expect it to be significantly market moving, assuming that the statement is similar to what it was last month."

CBA forecasts the central bank to raise the cash rate in August, he said.

The next focus for the market is expected to come overnight, when the Federal Reserve Chairman Ben Bernanke delivers a speech in the US, Mr Grace says.

Meanwhile, the bond market was softer at noon.

At midday, the June 10-year bond futures contract was trading at 94.760 (implying a yield of 5.240 per cent), down from yesterday's close of 94.790 (5.210 per cent).

The June three-year bond futures contract was at 95.050 (4.950), down from its previous close of 95.090 (4.910 per cent).