In a new forecast Morgan Stanley has predicted the Australian dollar to fall to US68c by the end of the year and to drop even further by the end of 2016 to US62c.
The Aussie dollar has fallen 18 per cent over the last 12 months thanks to RBA encouragement via statements and rate cuts, and falling commodity prices.
In a note to clients, Morgan Stanley analysts said: ‘Indeed, there was some market frustration with the recent rhetoric from the RBA that in one breath backs hard for a lower currency but then backs away from the easing bias that would have helped achieve this outcome.’
“We are more sanguine on this front, and like other major central banks, we view the recent RBA rhetoric and positioning as one that seeks greater flexibility linked to the overarching concept of data dependency.”
Jens Meyer from Fairfax Media says Morgan Stanley expects soft data to eventually force the RBA to cut rates again to 1.75 per cent in the fourth quarter.
Morgan Stanley analysts say the data itself should be enough to do most of the work in weakening the Australian dollar which would then help to support the Australian economy as it recovers from the end of the mining boom.
The falling Australian dollar is also a result of the increasing strength of the American dollar, not just the struggling local economy.