The Australian dollar has dropped to a near eight month low overnight.

At 0700 AEST on Tuesday, the local currency was trading at 88.73 US cents, down from 89.15 cents on Monday.

The Australian dollar fell as low as 88.53 US cents overnight, its lowest point since February 4, after a leading analyst said the currency was likely to fall below 75 US cents.

Roubini Global Economics analyst, David Nowakowski, said weak economic growth and low inflation would allow the Reserve Bank of Australia to cut its already record low cash rate to two per cent.

He also said the Australian dollar was likely to fall below 75 US cents in 2015, which caused the currency to fall overnight, BK Asset Management MD, Boris Schlossberg, said.

“Nowakowski made a case for a lower Aussie by stating that the firm expected Australian GDP (gross domestic product) to dip to two per cent next year thus allowing the RBA to lower rates once again and trigger a second wave of selling that would take the currency down to the 75 US cent level,” Schlossberg said.

“Nowakowski’s thesis rests on the assumption that commodity prices will continue to decline and certainly a sharp fall off in demand from China could prove his assumption to be true.

“However, while Chinese growth has moderated it has shown no signs of contraction. In addition, the Australian economy has shown surprising resilience and ability to rebalance away from pure mining growth to more services oriented output.”

All eyes would be on the release of Chinese manufacturing figures on Tuesday, Schlossberg said.

AAP