In one of the most bearish forecasts for the Australian dollar, Morgan Stanley expects the currency to drop to US68¢ by the end of the year, before finishing 2016 even lower at US62¢.

After an around 18 per cent fall over the past 12 months due to falling commodity prices, jawboning and targeted cash rate cuts, the Aussie has since February been stuck in a trading range of US76¢ to US81¢.

“Indeed, there was some market frustration with the recent rhetoric from the RBA that in one breath backs hard for a lower currency but then backs away from the easing bias that would have helped achieve this outcome,” Morgan Stanley analysts, led by Chris Nicol, write in a note to clients.

“We are more sanguine on this front, and like other major central banks, we view the recent RBA rhetoric and positioning as one that seeks greater flexibility linked to the overarching concept of data dependancy.”

Morgan Stanley expects soft data to eventually force the RBA’s hand, taking the cash rate down to 1.75 per cent in the fourth quarter, from 2 per cent currently.

But the analysts add that the data itself should do a lot of the heavy lifting required to weaken the Aussie, which in turn would support the economy in its struggle to transition away from the last gasps of the mining boom.

The lower Aussie forecasts are not only based on a struggling local economy, but also on continued strength in the greenback, the analysts say.

“The key short-term drivers of the US dollar will be growth and front-end yield differentials, which we expect to become even clearer with our team forecasting a strong retail sales figure on Thursday, adding to momentum from payrolls, housing data and the ISM.”

The median forecast by analysts for the Australian dollar at the end of this year is US74¢, edging up to US76¢ by the end of 2016, according to Bloomberg.