The Australian dollar is range-trading as investors await the Reserve Bank of Australia’s February cash rate decision.

At 0700 AEDT on Tuesday, the Australian dollar was trading at 87.54 US cents, up from 87.48 cents on Monday.

The Australian dollar rallied briefly overnight, reaching 88.34 US cents following weaker-than-expected US manufacturing data, Westpac senior currency strategist Imre Speizer said.

The Institute for Supply Management’s purchasing managers’ index showed US manufacturing sector growth slowed sharply, dropping to 51.3 from 56.5 in January.

The Australian dollar then fell back below 88 US cents ahead of the RBA’s Tuesday meeting, where the central bank is widely expected to leave the cash rate on hold at 2.5 per cent.

“The RBA today will be key,” Mr Speizer said.

“A switch in stance from easing to neutral is widely expected.”

AAP