The Australian dollar was higher in Asian trading yesterday as investors continued to lower their expectations of further interest rate cuts this year.

Futures markets yesterday were pricing in just 18 basis points of interest rate cuts, compared with 50 basis points at the start of the year.

National Australia Bank said it expected interest rates to be cut by another half a percentage point in the current easing cycle. It started the year expecting a full percentage point of reductions.

Traders said the shift reflected the Reserve Bank's decision earlier this month to leave the cash rate at 3 per cent, as it signalled that while it had scope to cut further, it would only do so if the economy weakened.

At 5pm AEDT, the dollar was buying $US1.0283, up US0.65c.