Now, with Greece on the precipice of a financial meltdown, a Chinese equity bubble deflating and continuing concerns about global growth, few analysts doubt the currency has further to fall. Few analysts doubt the currency has further to fall. National Australia Bank, for one, this week revised down its forecast for where the Aussie will be at the end of the year, from US74¢ to US72¢. Nor is it just the Australian economy that has come under attack: the Kiwi and the Canadian dollars have lost a lot of ground this week as the greenback and Japanese yen became the main beneficiaries of the hunt for safe havens. BK Asset Management's managing director of foreign exchange strategy Kathy Lien said: "Investors fear that the Greek crisis, sell-off of Chinese equities and decline in commodity prices could lead to a more dramatic slowdown in Australia, New Zealand and Canada's economy."

Why do global matters matter? So why exactly does drama on the other side of the world, or in a country as different to Australia as China, have such an impact on the spending power of Australians? For one, every time investors panic about the possible contagion of one country's problems on global markets and economies, they move together towards safe-haven assets. These are risk-free, or low-risk, financial instruments that are guaranteed to retain at least most of their value in times of trouble. The US currency, or US government bonds, are the best-known of these and have proved popular ports in a storm in recent days.

What role do commodities play in all this? Any currency from a commodity-exporting country - such as Australia, Canada and New Zealand - is vulnerable now. This is partly because most commodities are priced in US dollars. When investors are bidding up the value of the greenback, commodity prices and currencies adjust accordingly. So if the Australian dollar was buying US75.23¢ when the value of a metric tonne of iron ore was $US55.26 last Friday, it adjusted naturally to US74.51¢ on Tuesday when iron ore was worth $US49.60¢ a metric tonne. What role does China play?

Behind this equation is actual demand for iron ore from China, Australia's largest trading partner and by far its biggest customer of minerals. If volatility in the country's sharemarket - which has lost more than 25 per cent in recent weeks - points to basic weakness in the real economy, it can be reasoned that demand for Australia's iron ore and others commodities will continue to falter. The danger here is that mining groups in Australia and other resources-rich countries try to compensate for the the falling prices by producing and shipping more, which drives the price even lower. The hope is that high-cost producers will be eliminated from the competition, allowing supply and demand to eventually return to equilibrium. Do interest rates affect the Australian dollar?

Another external development that is driving the Aussie lower now is the difference between interest rates in Australia and the US, and expectations of how this gap might evolve. When investors buy long-term bonds - 10 years is the typical benchmark, or standard - they are buying an annual return that should reflect where real interest rates will be in 10 years. If, in the case of the US, the central bank is thinking about lifting short interest rates, then the attractiveness of these 10-year investments increases as expectations of a series of rises intensify. The Reserve Bank of Australia, in the meantime, has been cutting interest rates and may have to continue doing so because of the hit to the real economy from lower commodity prices.

The allure of its long-term bonds, then, starts to fade, so these are sold by investors who then buy US bonds. Less demand for Australian assets - physical and financial - equals a lower Aussie dollar. This pattern has now been in place since October last year, when the US Federal Reserve formally stopped what is called quantitative easing - or central bank bond-buying - and signalled an eventual series of increases in interest rates. When will these pressures ease? For all these reasons and others, such as the dramatic fall-off in direct foreign investment in mining infrastructure since the end of 2012, the Aussie will remain under pressure for the foreseeable future. Capital Economics Australian economist Paul Dales said: "Looking ahead, both our forecasts for the iron ore price and Australian interest rates are consistent with the Australian dollar weakening further against the US dollar.

"If the iron ore price were to fall from US$52 a tonne now to US$40 a tonne by December, then the Australian dollar may weaken to around US70¢. "Meanwhile, if we are right in thinking that the RBA will cut rates to 1.5 per cent [from 2 per cent now] and leave them there while the US Fed steps up the pace of [interest rate increases] next year, an Australian dollar rate of around US65¢ is possible."