Dollar tipped to hit 75 US cents within months

THE Australian dollar could fall as low as 75 US cents in the next few months, after plunging below 80 US cents for the first time in five and a half years.

THE Australian dollar could fall as low as 75 US cents in the next few months, after plunging below 80 US cents for the first time in five and a half years.

The local currency fell to 79.95 US cents around 0830 AEDT on Friday morning after the European Central Bank announced the launch of its stimulus program.

It was the first time the Australian dollar had fallen below 80 US cents since July 2009 and although the currency managed to rebound within minutes, currency analysts say we should get used to it.

The reason for the Aussie dollar’s overnight fall was US dollar strength, Western Union Business Solutions currency strategist Steven Dooley said.

The euro plunged after the ECB launched a scheme to buy 60 billion euros ($A86 billion) worth of private and public sector bonds per month between March 2015 and September 2016.

That sent the greenback skyrocketing, weighing on the Australian dollar.

But the Aussie’s fall below 80 US cents was only temporary because it was driven by investor moves, rather than any fundamental trigger, Mr Dooley said.

“A break below 80 US cents would’ve triggered a big move if it was driven by a poor piece of data or some kind of fundamental reason, but this morning’s push lower was basically just a couple of big traders trying to rig the market, which isn’t enough of a reason for it to break lower,” he said.

A more dramatic move below 80 US cents will probably happen in the next couple of weeks, with official inflation figures being released on Wednesday and the Reserve Bank’s interest rate decision the following week, he said.

Expectations are growing that next week’s inflation figures will be weak enough to push the RBA into slashing rates to a new record low on February 3, which could further weaken the Australian dollar.

“If there is a significant break below 80 US cents, the target is probably going to be 75 cents over the next few months,” he said.

ANZ on Thursday said it expected the currency to fall to around 76 US cents by mid year.

Originally published as Dollar tipped to hit 75 US cents within months