Dollar falls below US81c

THE dollar lost ground to noon, after two weeks of solid gains, after the central bank left interest rates on hold.
At 12 noon AEST, the domestic unit was trading at 0.8085/93, down from yesterday's close of 0.8147/50.

The currency traded between a low of $US0.8065 and a high of 0.8138 during the morning session.

The dollar was trading at its high just before 0800 AEST but slid to its lowest level just minutes after the Reserve Bank of Australia (RBA) announced official interest rates would stay put at 6.25 per cent.

RBC Capital Markets senior economist Su-Lin Ong said market views on whether or not the central would hike this month were split ahead of the RBA announcement.

"We think it was a pretty close decision," she said.

Economists surveyed by AAP were split on whether there would be a rate rise, with nine of the 19 expecting an increase.

Despite the dollar's fall this morning, Ms Ong said there was still strong support for the local unit.

"We also have to look at the global backdrop which is very strong, base metal prices are high and the terms of trade are at their strongest in 50 years," she said.

"You might see a near-term shock and softness but I think people will look at an opportunity to buy the currency."

Ms Ong said the market is now evenly split on whether the RBA will lift interest rates next month as it awaits inflation data for the first quarter of 2007, due out on April 24.

"It's a bit early to call."

The local dollar was likely to climb back above the $US0.8100 mark in the lead-up to the next RBA board meeting on May 1.

The RBA last raised interest rates in November.
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