The Australian dollar could continue to fall towards 65 US cents if commodity prices keep declining, says AustralianSuper.
AustralianSuper senior portfolio manager for currency, Mark Ferguson, said the Australian dollar (AUD) is 'fair value' at 71 US cents.
However, currencies have a tendency to "overshoot" fair value when non-fundamental factors like weak global sentiment are involved, Mr Ferguson said.
"If commodity prices continue to decline, we could see the AUD drift into the mid-60s," he said.
"For the AUD to stop weakening, investment markets need to be confident the RBA is finished cutting interest rates and to see continuing improvement in domestic economic growth.
"[Investment markets] also need greater confidence in global commodity prices, which has not appeared as yet," Mr Ferguson said.
While the fall in the AUD is bad news for Australians who want to travel or purchase goods overseas, it has worked out well for AustralianSuper's members.
"The lower Australian dollar (AUD) has provided a significant return windfall for members in AustralianSuper’s balanced option," Mr Ferguson said.
"This option has held a large exposure to overseas assets and foreign currency, which have increased in value with the fall in the Australian dollar.
"The balanced option has had a 20-25 per cent foreign currency exposure since well before the AUD started falling and this has really paid off," he said.
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