The local currency is being sold heavily as the US central bank prepares to wind down its stimulus program

This article is more than 7 years old

This article is more than 7 years old

The Australian dollar plunged to its lowest point against the greenback since September 2010.

It hit a 33-month low of 92.63 US cents early on Thursday morning before rallying to 92.9 in mid-morning trade.

The falling currency typically means Australian consumers pay more for overseas travel and purchases, but it boosts the national economy by helping exporters.

However, ANZ Banking Group foreign exchange strategist Andrew Salter said no meaningful economic effect would be felt in the short term.

He said the dollar had been overvalued for some time and its latest level was more appropriate.

Higher export income "would be expected traditionally to filter down to greater household income, greater tax receipts to the government and [improved] consumer sentiment", Salter told Guardian Australia. Business investment and employment would also pick up down the line.

The dollar would have to hold its present lower level "for a number of months" to have any tangible effect on the economy. "A couple of weeks is not going to have an impact," he said.

The dollar's purchasing power will decline as importers pass on higher costs to consumers.

Its fall followed upbeat comments by US Federal Reserve chairman Ben Bernanke, who suggested stimulus measures which injected $US85 billion into the US economy each month could end by mid-2014. Quantitative easing - the Fed's bond-buying program - would be wound down.

BK Asset Management managing director Kathy Lien told AAP the Australian dollar had been sold off more heavily than other nations' currencies as the greenback became more attractive to investors.

"Less quantitative easing means the Federal Reserve is pumping less money into the economy and no longer aggressively devaluing the (US) dollar," Lien said.