The Aussie dollar is likely to fall to around 70 US cents by the end of the year in response to higher US interest rates and sliding commodity prices, UBS predicts.
The investment bank said the local currency had now reached a "fair value" at around the 75 US cent mark, but said further falls were likely in coming months.
"We continue to expect further Australian dollar/US dollar depreciation ahead," UBS said, citing falls in commodity prices and its forecast that the US Federal Reserve will raise interest rates in September and December as key factors.
UBS' prediction comes as the Aussie trades around 74.20 US cents on Monday morning, down from 74.69 cents on Friday, but up from last week's six-year low of 73.92 US cents amid bad economic news from Greece and China.
The dollar plummeted last week following three weeks of turmoil on the Chinese stock market, which has lost almost 40 per cent, or more than $US3 trillion ($A4 trillion) in value.
Meanwhile in Europe, the stalemate between cash strapped Greece and its creditors drags on.
UBS said that if the Australian dollar did move lower, it could contribute to a recovery in the economy's non-mining sector where business investment has remained weak.
The Reserve Bank has previously said it would prefer the local currency to be around 75 US cents, but some economists believe it will have to fall closer to 70 US cents to boost growth.
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