Even a bearish view on the prospects for continued growth in Asia would see fair value for the Australian dollar at US75c or higher, according to Dirk Morris, a currency expert and chief executive of BT Investment Management who was at the Reserve Bank when the Australian dollar floated in 1983.

“It’s probably two standard deviations cheap. The fair value for the longer term is about US85c,” he said last Thursday.

Morris, who has a strong background in active currency management, including a stint running global currency management for Putnam Investments, was speaking after the Aussie dollar hit a low of US63.3c last week, in offshore trades, and ahead of the weekend announcement by Prime Minister Kevin Rudd guaranteeing deposits at all financial institutions. It finished last week on US66.3c, which represented a 17 per cent fall for the week, to a five-and-a-half-year low.

Yesterday, the Aussie dollar firmed again on the Rudd announcement, despite the increased likelihood of another interest rate cut by the Reserve Bank.

In early trading the Aussie dollar rose to US67.96c.

Morris said: “Until six weeks ago all the fundamentals were supportive of a stronger Australian dollar … The key short-term driver of momentum is the RBA’s actions on interest rates. We’re seeing the unwinding of the currency alpha players. The last US10c (down to US65c) has been hedge funds and others realising assets because their clients have been taking money away.”