THE Reserve Bank believes the Australian dollar is about 5¢ overvalued, but is considered likely to leave interest rates on hold this month after better than expected news on business investment intentions.

The Bureau of Statistics survey showed mining investment slipped 2.9 per cent in the three months to December, manufacturing investment fell 2 per cent and investment by services firms slid 7.5 per cent.

When asked about their plans for the coming year mining companies were 12 per cent more pessimistic than a year ago and manufacturing companies 23 per cent more negative. But services firms - regarded as the most responsive to interest rates - were 5 per cent more positive.

"Manufacturing is a disastrous story whichever way you look at it," said Westpac's chief economist, Bill Evans.

"The slide is the biggest we've ever seen. But planned investment by services companies is four times as big and is set to climb. These are companies putting in warehouses or showrooms."

Mr Evans had been expecting an interest rate cut at the Reserve Bank board's next meeting on Tuesday, but he now thinks there won't be one until June when the next set of investment figures are released.

The dollar slipped half a cent to US102.4¢ after the investment news before climbing back to US102.8¢ as traders shifted their focus from actual to expected investment.

Freedom of information documents released on Thursday show the Reserve Bank believed the dollar was about 7 per cent overvalued in December. At the time the Australian dollar was trading for US105¢, meaning the bank believed it should have been worth about US98¢.

HSBC Australia's chief economist, Paul Bloxham, said while the peak in mining investment was approaching, the drop-off looked like being more gentle than had been feared.

"The fear was that you might get a projection which suggested you were going to get a sharp drop-off, but these numbers suggest it is going to be more of a plateau,'' he said.

A near record $152 billion of business investment is expected in the coming financial year, $100 billion from mining.