BEARISH bets for the Australian dollar are turning savage, with Credit Suisse slashing its 12-month forecast to US75 cents after conceding the currency is "normalising" quicker than it expected.

In what may be the biggest dollar call by a major bank in the market, Credit Suisse overnight slashed its 12-month forecast for the dollar to US75c. It comes after Credit Suisse in May made one of the first downgrades, cutting its 12-month bet to US85c.

“It has become clear to us that the process of ‘normalisation’ is occurring more quickly than even we had anticipated,” said the bank’s London-based head of commodities research Ric Deverell. “To that end today we revise our three-month forecast to US87c, and our 12-month forecast to US75c.”

Read Next

Experts have in recent months revised lower their Aussie forecasts as the US Federal Reserve signals the tapering of its stimulus program and China slows, with National Australia Bank, Westpac and Goldman Sachs lopping their targets last week.

Today, TD Securities also cut its bets, saying the Aussie would trade around US90c for the remainder of the year, compared to its prior year end target of US96c.TD expects it trade between US85c-US90c over 2014 and also lowered its full-year 2013 GDP forecast from 3 per cent to 2.7 per cent.

The dollar has fallen about 13 per cent from above $US1.05 in April, allowing the Reserve Bank to this week keep official interest rates on hold as the currency’s dive takes some of the pressure off the economy.

But the RBA said the still “high” dollar may fall further over time, “which would help to foster a rebalancing of growth in the economy” from mining investment to other sectors.

Credit Suisse’s Mr Deverell said mining investment, which peaked at 8 per cent of GDP earlier this year, may begin to retrace in 2015 “just as quickly as it went up”.

“The fall in the Aaustralia dollar trade-weighted index is currently occurring at a similar pace seen following the 1970s mining peak,” he said. “While on that occasion the exchange rate was not freely floating, thereby limiting the relevance of the comparison, that episode does well explain the potential for further substantial downside.”

