The Australian dollar has bounced back after dropping below 62 US cents for the first time in more than two years.
The Aussie was buying 62.11 US cents on Friday afternoon, about where it was trading last week, after it fell as low as 61.83 US cents early on Thursday.
Other than three days in October 2022, the Aussie has not been below 62 US cents since late March and early April of 2020 - the first time it had reached so low since 2008, during the global financial crisis.
Its level on Friday is still 10 per cent lower from the start of October, when the Aussie was buying more than 69 US cents.
The slide has been more a matter of US dollar strength than Australian dollar weakness, with the greenback rising 7.6 per cent to a 26-month high against a basket of six other currencies during that time.
Donald Trump's victory in the US presidential election and his promised policies of tax cuts, increased spending and tariffs have led to a more cautious outlook on US rate cuts for 2025, with fewer expected than previously predicted.
IG analyst Tony Sycamore said Trump was likely to implement tariffs on imports, which would dampen growth expectations outside the US and weigh on commodity prices.
The Australian and New Zealand dollars were particularly vulnerable to risks of Chinese tariffs, he said.
A dovish pivot by the Reserve Bank in December after the release of lacklustre third-quarter gross domestic product figures has also put pressure on the Australian dollar as interest rate differentials play a big role in determining currency values.
Mr Sycamore said the Aussie had priced in a lot of bad news in a short time and could rebound from here if it managed to hold above 61.70 from October 2022.
Falling through that support level would open the way for a slide to 60 US cents, he said.
A weaker Australian dollar would make holidays in the US more expensive and increase the price of imported goods including petrol and vehicles.
However, it would also make Australian exports more competitive and make the country a more attractive tourist destination.
None of the big banks have changed their predictions for rate cuts in 2025 despite the slide in the currency.
