The market turmoil of recent days is likely to push the Australian dollar lower and could even spark another rate cut.
Plunges on China's share market amid fears about the strength of the world's second largest economy caused the biggest falls on the local share market in six and a half years on Monday, and the Australian dollar threatened to break below 70 US cents.
Concerns about Australia's top trading partner also caused the futures market to bet on another interest rate cut by the Reserve Bank, with one in February now fully priced in.
That's in contrast to earlier expectations that the RBA was finished with its rate cutting cycle after the bank upgraded its longer term economic forecasts earlier this month.
But Commonwealth Bank chief currency strategist Richard Grace said the Australian economy has already proven quite resilient to a slowing China.
"A further decline in China's stockmarket is unlikely to change that assessment," he said.
"China's economy has been slowing for more than five years, and so far the slowdown has not drastically impacted Australia's economy."
Mr Grace said China is importing less, but Australia is taking a greater share of that trade thanks to a weaker exchange rate.
China now imports 63 per cent of its iron ore form Australia, albeit at a price that has halved in the past year.
"The volume of Australian resource exports continues to make new highs," Mr Grace said.
"While the growth rate of these exports to China's has slowed, the slowing is not enough to derail Australia's economy."
Markets stabilised on Tuesday, and the Australian dollar bounced back above 72 US cents.
However LTG GoldRock director Andrew Barnett said the currency's bounce will be short lived.
"It's not unusual to see a rebound like this on the Aussie as the exhaustion factor takes over and people go bargain hunting," he said.
"I still think we're likely to see over the coming month or two the Aussie dollar back under 70 US cents, 68 cents is my target."
A lower exchange rate makes it easier for local exporters to sell their goods and services to foreign buyers, and makes locally produced goods and services more competitive with imports.
Mr Barnett expects the Australian dollar will spend most of 2016 below 70 US cents.
""I think generally speaking we're going to see the selling pressure continue on the Aussie, we're going to see bounces here and there but longer term we're heading lower," he said.
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