The Australian dollar slid below parity with the greenback on Monday and analysts tipped it could fall further as speculation mounts that the US could wind back its quantitative easing policy.
The "Aussie" touched 99.68 US cents before recovering to 99.95 US cents late in the day, after Saturday briefly dipping under parity in offshore trade for the first time in 12 months on fears the mining-powered economy was slowing.
Analysts said the currency's robust run may have peaked as Australia's historic boom in mining investment plateaus, coupled with speculation that the US Federal Reserve will ease its bond-buying programme.
It follows a Wall Street Journal story over the weekend that the Fed had come up with a strategy to wind down its US$85 billion dollar per month bond-buying programme, although it has not been decided when to start.
"The Aussie dollar has started the week on the back foot, struggling to retain parity against the greenback," said CMC Markets trader Niall King.
"As speculation mounts that stimulus will be reduced, the increasing relative strength of the US dollar has, as a bi-product, eased some headaches for Australian exporters at least."
The strong Aussie has hurt some local industries, with tourism, manufacturing and education exports particularly hard-hit, and the central bank last week slashed interest rates to a record low of 2.75 percent.
In doing so it cited the need to stimulate Australia's non-mining economy.
The bank expects Australia's economy to expand at below-average pace this year, with growth of 2.5 percent and inflation of 2.25 percent. The government will release updated economic forecasts on May 14.
Adding to the bearish tone for the Aussie was a move by Barclays to lower its outlook to 93 US cents over the next year compared with 95 US cents previously, citing the interest rate cut.
US retail sales data later Monday could prove another threat to the Australian dollar, while the national budget on Tuesday may also see a sell-down.
"Tomorrow's budget could be the next bearish catalyst, with the market expecting a deficit of around one percent of GDP, or Aus$15 billion," said IG Markets' strategist Chris Weston.
He added that the Aussie also looked vulnerable against a host of other currencies, including the British pound and the euro.