The Australian dollar is expected to weaken further, after falling past the psychological barrier of US90¢ to an almost three-year low amid further signs of a recovering US economy.
It fell as low as US89.27¢ on Thursday morning before recovering to US89.71¢ late in the session.
The dollar slipped below US90¢ on Wednesday night, after a surprise rise in US growth for the second quarter and an improved employment report pushed the US dollar higher. It pared back some of its losses after better-than-expected Chinese manufacturing data, but remained on track to finish the week more than 3 per cent lower in what would be its biggest weekly fall since September 2011.
The dollar was already reeling from Reserve Bank governor Glenn Stevens' comments on Tuesday on inflation, which were interpreted as being dovish and pointing to further interest rate cuts.
"It's still ringing in the market's ears - all those comments from Stevens earlier in the week," RBS senior currency strategist Greg Gibbs said.
"The Australian dollar clearly remains in a down trend, having broken significantly through US90¢, so I think sentiment is still pretty poor for the currency."
The Australian dollar has shed about 15 per cent of its value against the greenback since April, and is the worst-performing currency against the US dollar in the past six months.
The dollar has also weakened against other currencies, shedding about 15.7 per cent against the euro, and more than 8 per cent against the Canadian and New Zealand dollars.
The currency had been consolidating some of its losses in July, trading mostly within the US90¢ to US93¢ range.
Westpac chief currency strategist Robert Rennie said while the Australian dollar faced more downward pressure, its large losses over the past few months were less likely to be replicated.
"There's a host of support levels that come in at US88.5¢ and US89¢. I think it would only be on rate cuts and guidance on further rate cuts to come, downward revisions from the RBA in terms of its economic forecasts, and stronger US data that we'll see further rapid falls in the Australian dollar," he said.
A slowing Chinese economy would also continue to weigh on the currency, with a separate HSBC-Markit manufacturing survey released on Thursday falling to an 11-month low as demand from domestic and external markets weakened, Mr Gibbs said.