$A sheds one US cent on rate cut hopes

The Australian dollar is one US cent weaker after interest rate cut expectations for February pushed the currency down to a fresh five-and-a-half year low.

At 1700 AEDT on Friday, the local unit was trading at 77.91 US cents, down from 78.98 cents on Thursday.

Speculation that the Reserve Bank of Australia would cut the cash rate next week, or at least start signalling possible cuts this year, sparked a sell-off.

The currency fell as low as 77.20 US cents on Friday morning, its weakest level since July 2009.

Financial markets are now pricing a February rate cut as a two in three chance, hurting the Australian dollar, Commonwealth Bank currency strategist Joseph Capurso said.

'There's significantly more weakness in the Aussie to come,' he said.

A healthy set of US economic growth figures for the December quarter, due for release on Friday night, was expected to boost the greenback and further weaken the Australian dollar.

Mr Capurso said the local currency was likely to fall to 75 US cents by the end of March as the US Federal Reserve considered raising its rate.

'It pushes the US dollar up against every currency, it pushes the Aussie down,' he said.

AAP

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$A sheds one US cent on rate cut hopes