The Australian dollar is virtually unchanged ahead of the Reserve Bank of Australia's (RBA) first board meeting for 2013.
At 0700 AEDT on Tuesday, the currency was trading at 104.33 US cents, down slightly from 104.37 cents on Monday afternoon.
The RBA holds its first board meeting of the year on Tuesday and will announce at 1430 AEDT whether it will cut the cash rate or keep it on hold for the month.
Bank of New Zealand currency strategist Mike Jones said the Aussie dollar held its ground overnight in anticipation of the meeting, despite sharp falls on European stock markets.
Fears of political turmoil in Europe hit markets overnight, with Spanish Prime Minister Mariano Rajoy under growing pressure to resign due to a corruption scandal and former Italian prime minister Silvio Berlusconi showing solid gains in polls ahead of national elections later in February.
"The Aussie dollar seems to have sailed through that reasonably unscathed," Mr Jones said.
"I suspect that's got to do with the approaching RBA meeting today. Investors are cautious about dipping their toes into the Aussie market ahead of that decision."
Mr Jones said the Australian dollar was likely to rally if the RBA kept the cash rate on hold for February.
"If they don't ease then, certainly, the knee-jerk reaction is going to be for a higher Aussie dollar and we will probably see it move back into that 104.50-105.00 US cent range," he said.
The central bank cut the cash rate a quarter of a percentage point, to 3.0 per cent, in December, its last meeting.
AAP's survey of 15 economists shows that all but one expect the RBA to keep the cash rate steady for February.