Australian one dollar coins surround a U.S. one dollar note in this photo illustration taken in Sydney July 27, 2011. Australian consumer prices rose by more than expected last quarter while underlying inflation proved alarmingly high, reviving pressure f
Australian one dollar coins surround a U.S. one dollar note in this photo illustration taken in Sydney July 27, 2011. Australian consumer prices rose by more than expected last quarter while underlying inflation proved alarmingly high, reviving pressure for an increase in interest rates and lifting the local dollar to a 29-year peak. Reuters/Tim Wimborne

The Australian dollar hit a four-year low on Thursday at US82.15c but it recovered and closed at US83.20c. Reserved Bank of Australia (RBA) officials warn that the Aussie dollar could further depreciate to US75c.

Because the Aussie currency is materially overvalued, RBA Governor Glenn Stevens believes it needs to fall by another 9 percent from its current level. He said, quoted by The Australian, "A year ago I said probably 85 US cents was better than 95. And if I had to pick a figure now, I would say probably 75 is better than 85."

However, Stevens declined to speculate on the direction of the key lending rate in 2015. He said there is a need to have a fresh look in the coming year, but if ever the need to reduce rates happens, Stevens hoped it would be on account of soft inflation and a "calmer housing market."

But analysts from Goldman Sachs, National Australia Bank and Westpac believe the RBA would cut interest rates twice or thrice in 2015.

RAB board member John Edwards, in another interview with the Wall Street Journal, shared Stevens's view that the Aussie currency could face further devaluation. Edwards also believes a low-rate environment would continue in 2015 because of Australia's soft economic outlook next year.

Pegged against other major currency, the Aussie dollar traded at 66.62 euro cents, 52.53 British pence and 98.17 Japanese yen.

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