The Australian dollar's stubborn strength at the start of the year has provided a hindrance to the economy, but recent declines show the currency once again fulfilling its role as a "shock absorber," a trend that is likely to continue for awhile, analysts told CNBC.
After remaining above parity to the U.S. dollar for the majority of the past two and a half years, the currency has tumbled over 13 percent against the dollar since mid-April, as on concerns of a slowdown in China, its biggest trading partner.
Analysts say that by staying weak, the Australian dollar is helping to prop up the economy by boosting export demand, hence playing the role of a "shock absorber."
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"In the past three months, the Australian dollar has once again started to act as a shock absorber," read a HSBC Global Research note. "The fall is good for Australia's growth prospects, as it should support the export sectors and import-competing industries," said HSBC.
According to Andrew Salter, currency strategist at ANZ, the Australian dollar has a history of helping the economy in times of crises, and also in containing inflation during risk-on periods.
"When you look at the past 25 years, there have been very few occasions when the currency failed to play its role as a global shock absorber," said Salter. "But in recent years it hasn't as much. For example in 2012 it traded a little above fair value, at a time when it needed to be below fair value," said Salter.
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However, Salter added that in recent months the Australian dollar has started to play this role again.
"Right now the weakness is having an important impact on the economy and helping stimulate manufacturing, which provides a boost to the job market, and for tourism, helping make Australia's industry more internationally competitive," he added.