THE dollar drifted just above its lowest in almost two months as traders anticipated a Reserve Bank of Australia interest-rate cut next Tuesday.
The Aussie was at $US1.0257 late today. It was at $US1.0238 late yesterday in Asia after trading as low as $US1.0223. It was $US1.0356 late on Wednesday.
Money markets have priced in a 55% chance of cut from the RBA on Tuesday taking the cash rate to a never-seen-before 2.75%.
While traders expect a cut economists are less certain. A Wall Street Journal survey of 18 economists showed only two expecting a cut. More than two-thirds expects at least one cut by December.
Anticipation of a cut has grown following news of tame first-quarter inflation, a fall in new housing permits and a rise in unemployment.
"This decision is likely to be a closely run event since we think the case for another cut has now been made," Westpac chief economist Bill Evans said.
"However, with rates at historical lows, we think the [RBA] board will be cautious and decide to wait another month before moving," he added.
Falling commodity prices have added to the case for a cut, Deutsche Bank chief economist Adam Boyton said. Iron-ore prices have fallen by around 5% since the last policy meeting at the start of April, he said.
Recent data from China, Australia's biggest trading partner, also points to a slowing. Spot iron-ore prices were about $US129 a tonne today - their lowest since December.
Conditions internationally are also weaker with the European Central Bank announcing a cut in interest rates overnight.
"Weak growth and disinflation clearly top the list of concerns" at the ECB, Citigroup economist Steven Englander said.
US employment data due out overnight will set the tone for markets into next week.
Economists expect that report to show non-farm payrolls rising by 148,000 - compared with March's 88,000 gain.
While an improvement that data is still week and not indicating room for the US Federal Reserve to wind back its stimulus.
