BlackRock is shorting the Australian dollar on a bet the central bank will cut interest rates to as low as 0.5 per cent to revive the struggling economy.

BlackRock is tipping the Australian dollar to fall to a 10-year low by the end of next year. Credit:Bloomberg

The Aussie will extend this year's decline and probably fall as low as US65¢ next year, said Craig Vardy, head of fixed income for Australia at BlackRock, which oversees $US6.52 trillion ($9.5 trillion). The Reserve Bank of Australia will keep easing as the economy cools and US-China tensions weigh on global growth, he said.

"I've no doubt that the RBA wouldn't have an issue taking the cash rate below 1 per cent," Vardy said. The central bank wants to see lower unemployment and higher inflation, and is "probably willing to push a little harder to get some traction", he said.

Australia's dollar has tumbled about 3 per cent this year as US-China trade frictions and signs global economic growth is slowing weigh on commodity currencies. The Aussie fell to US68.32¢ in early London trading on Tuesday, the weakest since the so-called currency flash crash on January 3. The last time it was below US65¢ was in March 2009.