Importers are struggling to cope with a weaker Australian dollar after the 11-month rally that drove it as high as 94 US cents came to an abrupt end.

Turmoil on international markets, triggered in large part by debt default fears for several European nations, has stoked global growth jitters. The Aussie dollar, tied closely to commodity prices, has taken a battering, losing more than 6 per cent in the past month, making it the third-worst performing major currency over the period.

Currency consultants say they have been flooded with queries from corporate clients seeking ways to limit the damage from a sinking dollar.

As recently as mid-January, the Aussie was buying 92.5 US cents. This morning, it touched as low as 86.15 US cents, and was recently trading at 86.5 US cents.

''Certainly you have significant concern from importers,'' said HiFX senior consultant Thomas Averill. ''The Aussie has already moved significantly. And the previous drop from the July to September period is still in their minds.''

A falling dollar makes imports pricier for local businesses, cutting into profits of companies that have not hedged their exposure to a fluctuating currency.

The slumping dollar will add headwinds to a retail sector - purveyors of many of the imports - already squeezed by weak Christmas sales.  

Travel companies handling overseas airfares priced months in advance make up another sector under the pump from a weaker dollar.

Mr Averill said some clients are now worried the Australian dollar will drop another 10 to 15 per cent rapidly -  matching a the steep fall witnessed during the financial crisis.

European drag

Global markets are fretting about the possibility of debt default among European Union nations, with Greece, Portugal and Spain among the leading candidates.

If that happens, the underlying fundamentals of the euro will be undermined - but with only limited benefit to Australian importers.

Instead, the problem of investors dumping the euro is that other currencies deemed even more risky - such as Australia's - gets sold off too.

The greenback typically gains in such shifts in sentiment, as it has during the past couple weeks. Since much of Australia's imports come from countries pegging their currency to the US dollar - particularly China's - a stronger greenback currency pushes up the cost of imports.

Mr Averill thinks the Aussie may tumble as low as 82.5 US cents in coming weeks, but will resume its upward trend once European debt issues are played out.

Bounce ahead?

Travelex head of client management Anthony Gray said importer clients had reported new risk fears in recent weeks.

''Everything was sitting pretty there at 92 US cents for a while and the sovereign issues that have come out of the EU have really dented the Aussie's stability.''

Most his clients are still looking for a bounce in the Aussie's value in coming weeks, which could send the dollar towards the 90-US-cent mark.

However, slumping Reserve Bank interest rate expectations could see it sink to 82 to 83 US cents over the next year, he predicts. The central bank shocked the market last week by keeping rates steady at 3.75 per cent.

The market is currently pricing in three rate 25 basis-point hikes over the next year, but Mr Gray says there may be even fewer increases.

ANZ economist Amy Auster believes the dollar could dive lower sooner if  the local currency falls through the 85.6-US-cent level, she said, dropping to 83.5 US cents and even further from there.

''I think there's enough uncertainty for what's going on (that) investors are a little unsure of what direction we're going in,'' she said.

In any case, Europe's fiscal woes will continue to influence the currency's value, Ms Auster said.

czappone@fairfax.com.au

BusinessDay