The Australian dollar is marginally weaker as disappointing American factory data dents the greenback ahead of the US Federal Reserve’s monetary policy meeting.

At 0700 AEDT on Tuesday, the local currency was trading at 76.42 US cents, down from 76.49 cents on Monday.

The Australian unit hit its offshore highs, rising close to 77 US cents, after the New York Federal Reserve’s Empire State business conditions index for March showed a decline for the second straight month.

The greenback took another hit from US industrial production data from the Federal Reserve, which showed a weaker than expected increase in February.

The weak manufacturing numbers on the eve of the US Fed’s Federal Open Market Committee meeting convinced traders that interest rates may stay on hold for longer, BK Asset Management MD, Kathy Lien, said.

“We had broad based weakness in US data … all surprising to the downside,” she said from NY.

“All of this led investors to believe that the US Federal Reserve will be emphasising patience at this week’s meeting.”

Traders are also fearful that US Fed chair Janet Yellen may suggest leaving rates on hold in June.

“That is causing the US dollar to slide across the board,” Lien said.

AAP