The Australian dollar drifted lower on Tuesday ahead of an expected Federal Reserve interest rate rise that will further erode the currency's yield advantage given the flat interest rate outlook in Australia.

The Reserve Bank of Australia board met on Tuesday to consider monetary policy, but its 5.5 percent cash rate is widely expected to be unchanged when the central bank's decision is made known on Wednesday. In contrast, the US fed funds rate is expected to rise by 25 basis points to 4 percent.

One Aussie dollar fetched $0.7461/66, compared with $0.7488/90 late here on Monday. It traded a $0.7455-$0.7483 range on the day.

Copyright Reuters, 2005