The Reserve Bank of Australia (RBA) is unlikely to cut interest rates on Tuesday, as the sharp drop in the Australian dollar has done most of the work for the central bank, analysts tell CNBC.
Kieran Davies, economist at Barclays, said the markets are currently pricing in a 22 percent chance of a 25 basis point rate cut, down from 55 percent earlier this month.
"The RBA seems likely to leave the cash rate unchanged given the further steep fall in the exchange rate," Davies said in a note on Monday. "The RBA will probably retain its easing bias, although the recent rephrasing of the bias suggests that the hurdle to cutting again has increased given the large fall in the real exchange rate."
(Read More: Crumbling Aussie—Why Economists Aren't Worried)
Scott Cavanough, senior vice president of financial markets at Compass Global Markets, backed that sentiment saying that the big fall in the Aussie dollar over the past month will be having the desired effect of an interest rate cut.
"A drop in the currency is probably helping the RBA policy. At this stage, if Aussie (dollar) holds above that 90 cent level, then there'll be less chance of an interest rate cut - certainly if it falls down to into the 80s, then a chance of an interest rate cut will drop," Cavanough said.
The Australian dollar fell to a 34-month low on Monday to $0.9110 - levels unseen since September 2010. That's down over 13 percent from its peak this year in January of $1.059. The currency has taken a beating on falling commodity prices, a slowdown in Australia's largest trading partner China and the likelihood of tapering of monetary stimulus in the United States.