The Australian dollar is struggling near five and a half year lows amid growing expectations that the Reserve Bank will cut interest rates this week.

At 0700 AEDT on Monday, the local currency was trading at 77.55 US cents, down from 77.91 cents on Friday.

The Australian dollar dipped to 77.26 US cents overnight, near its July 2009 low, amid growing expectations that the cash rate will be slashed to a new record low of 2.25 per cent on Tuesday.

The currency was also weighed down by disappointing Chinese figures showing manufacturing activity in January contracted for the first time in more than two years, coming in at 49.8.

Meanwhile, the US dollar was still going strong, despite disappointing US economic growth figures, Bank of New Zealand currency strategist, Raiko Shareef, said.

Official figures showed that US economic growth slowed to 2.6 per cent in the December quarter, as imports surged and government spending dwindled.

“A softer than expected US GDP (gross domestic product) report failed to materially take the shine off the US dollar,” Shareef said.

Upbeat comments from several US Federal Reserve officials on Friday were also boosting the greenback, he said.

AAP