The Australian dollar has come under heavy and sustained selling pressure, falling to 63.13 US cents earlier today.

It was last at this level late last year — reaching a low of 61.89 US cents on October 14, 2022 — having spent most of 2023 above 66 US cents.

AMP’s chief economist Shane Oliver said the “risk” is that the Australian dollar falls into the 50s against the greenback in the short-term.

He said concerns about the Chinese economy, and the global economy more broadly were weighing on the local currency.

“The trend is still down [for the Australian dollar],” Dr Oliver said.

He said the currency markets were watching for the dollar to break 62 US cents.

In that event, he forecast the dollar would be at risk of a larger fall — to 55 to 58 US cents.

The dollar fell more than one per cent overnight but selling continued in Asian trade this afternoon when the Reserve Bank decided to leave its cash rate on hold at 4.1 per cent.

“[The Australian dollar] has come under further pressure as the RBA held rates on hold for a fourth straight month,” Jamieson Coote Bonds executive director Angus Coote told The Drum.

“The RBA wording in the statement following the announcement was very similar to previous months suggesting that rates could be on hold from here.

“Very simplistically — given the interest rate differentials between Australia and the USA, people will buy the [US dollar] for the yield [return] advantage it carries over Australia.

“RBA cash rate is at 4.10 per cent [while the Federal Reserve] funds rate is at 5.375 per cent.”

The value of the Australian dollar is influenced by global investor sentiment, the price of commodities (including iron ore and oil), and the differing interest rate settings of individual countries.

What Mr Coote is saying is that a perception among international investors that the United States bonds will offer more attractive returns in the future is leading currency traders to sell Australian dollars and buy US dollars to take advantage of those higher returns.

It’s unclear when this dynamic will shift.

Economists also warn that a significant fall in the Australian dollar of more than 10 per cent would put further upwards pressure on inflation.

That is because it costs businesses more to buy imported goods for sale here in Australia – a cost of which they can pass onto customers in the form of higher prices.