The Australian dollar has taken a nose dive, sinking more than one US cent following bullish moves from the greenback.

The local currency sank as low as 73.55 US cents overnight, but bounced to 73.76 US cents at 1320 AEST on Thursday.

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CommSec chief economist Craig James said the greenback strengthened against all major currencies following upbeat comments from US Federal Reserve Chair Janet Yellen.

In prepared testimony to Congress, Ms Yellen stuck to her forecast for an increase in the Fed’s key interest rate later this year and predicted a pick-up in the US economy.

Mr James tipped the greenback to remain strong in the medium term, which would put further pressure on the Aussie.

“We’re now looking at 72 US cents by the end of the year and 70 US cents by March and June of next year,” he said.

The downward trajectory would provide a boost to the local economy and encourage the Reserve Bank of Australia to leave the cash rate at an historic low of two per cent, Mr James said.

“It should improve the competitiveness of the Australian companies versus imports and on the export market,” he said.

“It’s just another reason why the Reserve Bank is more likely to be sitting on the interest rate sidelines for the remainder of the year.”