Economy can cope with lower dollar: Hockey

Treasurer Joe Hockey is comfortable with a falling Australian dollar, and says the economy can cope with currency volatility.

A 1 Australian Dollar coin and a 1 US Dollar note are seen in Canberra, Tuesday, May 21, 2013. As the US economy rebounds, there are predictions that the Australian dollar could fall as low as 90 US cents in the coming weeks and months. (AAP Image/Lukas Coch) NO ARCHIVING

Treasurer Joe Hockey says Australia can cope with a falling Australian dollar, despite it hitting a fresh five and a half year low.

Mr Hockey noted that since the currency was floated on the foreign exchange market it has been over 100 cents against the US dollar and below 50 US cents.

"Australia's flexible economy can cope with that sort of volatility," Mr Hockey told reporters in Sydney on Friday.

However, he refused to speculate where the currency would head from here.

The currency is currently trading at around 77.7 cents.

He said the market was factoring in further cuts in interest rates but that was a matter for the Reserve Bank.

The central bank will hold its first meeting of the year on Tuesday.