Heading down Sydney-based FOREX.com market analyst Chris Tedder said a variety of factors had conspired against the currency, will overseas factors playing a big role. ‘‘We don’t have a lot of upside for the Aussie at the moment," Mr Tedder said. “On the downside, we’ve got political uncertainty in Greece, we’ve got the Spanish banks, and disappointing economic data of late both domestically and in our largest trading partner - China.” “It’s painting a bearish picture for the Aussie,” he said. “From here we’re going to see it continue to slip lower,’’ he said.

RBA warning Adding to the dollar's headwinds, the Reserve Bank warned today that growth in non-mining sectors is likely to disappoint in the years ahead, even as the overall economy continues to expand. ‘‘Overall GDP growth is expected to return to around trend over the forecast horizon, with the recent reductions in the cash rate providing some boost to demand in the non-mining-related parts of the economy,’’ said RBA deputy governor Phillip Lowe in a speech in Melbourne. Half of all new jobs will be related to the booming mining sector over the next few years, he said. The RBA official also said growth in the non-mining sector would be dependent on companies' and employees' ability to change and improve the efficiency of their work.

Australia’s economy grew at 2.3 per cent in 2011, although the bulk of that expansion was accounted for by the rekindled mining boom. Mr Lowe, though, cautioned against views that the Australian dollar is about to make a major retreat. "It's highly likely Australia will continue to have quite a high exchange rate for years to come," said Mr Lowe. The dollar has averaged $US1.048 over the past year. That's up from 90.6 US cents over the past five years and 80.1 US cents over the past decade. Since 1981, the currency has averaged 76.8 US cents. Rate cuts

Another reason for the dollar's retreat in recent months - it was buying $US1.08 at the end of February - has been the outlook for interest rates. As the prospect of more rate cuts increased, foreign investors have had less reason to park their funds in Australia. The RBA cut its key cash rate by 50 basis points last week - twice the amount expected and its biggest reduction since the depths of the global financial crisis. The latest cut is likely to be followed by more, perhaps as soon as June 5 if financial markets are correct. And those same investors are tipping a further three cuts by this time next year. If the latter projections are accurate, those cuts would lower the RBA's cash rate to just 2.75 per cent - even below the level reached during the GFC.

China lift The dollar's slide to below parity got a brief respite this morning after investors digested amove by the Chinese central bank to cut the amount of cash banks must hold as reserves by 50 basis points to 20 per cent. The reduction was the third in the past six months and an admission China's economy needs some stoking. China is Australia's largest trading partner, buying most of the country's exports of iron ore and other minerals. Figures out of Friday showed China's factory output in April was growing at its slowest pace in three years, while investments in factories and equipment slowed to its lowest level in nearly a decade. Overshadowed

Westpac New Zealand senior market strategist Imre Speizer said concerns about the implications of Greece's political instability had overshadowed news about China's banks being prodded to lend more. "Usually that would elicit a positive response from the Australian dollar and it did bounce a little bit but you would need a microscope to see it," Mr Speizer said. "That suggests that the market is quite nervous about developments in Greece." Mr Speizer said the Australian dollar was likely to fall sharply if it dropped below parity for long. "It might hold (above parity) for a little while but nobody really knows," he said.

"But if it does break it is likely to be a powerful break." Greece worries Greece moved closer to fresh elections on the weekend as talks between political parties, who are divided over austerity measures, failed to establish a coalition government. Voters angry at the austerity measures, imposed in order to secure bailout funding from the European Union, demolished the ruling government at last week's poll but failed to give any party a parliamentary majority. Loading

If the country is forced to hold new elections it will be unable to enact further planned austerity measures in the next month, putting at risk the bailout funding and the country's membership in the eurozone. With AAP, Reuters

