The dollar is on track to record its biggest monthly loss against the US dollar since June, amid Reserve Bank jawboning, rising Chinese interest rates, commodity price weakness and heightened expectations of a near-term wind-back of the Federal Reserve's stimulus program.
The dollar is trading near three-month lows against the US dollar and euro. It has been the second-biggest loser, after the yen, against the two currencies this month.
"The Australian dollar is more clearly in a bear market," RBS senior currency strategist Greg Gibbs said. "[It's] reflecting the evidence that Australia's resources investment cycle is in decline, a sense that the restructuring [and] reform process in China is likely to see a steady decline in its growth over the medium term and its reforms increase the risk of a significant disruption to growth."
The dollar has declined 2.79 per cent against the US dollar and 2.54 per cent against the euro this month. It is just 3 per cent higher than its year's low of US88.48¢ in August, and was buying US91.29¢ late on Monday.
The RBA's attempts to talk down the dollar, which was stepped up last week following governor Glenn Stevens' remark on the possibility of interventions in the foreign exchange market, has also weakened the currency.
"It adds an extra factor that needs to be considered for [foreign exchange] investors," Deutsche Bank currency strategist John Horner said of the intervention rhetoric.
"We think it is ultimately not going to have that much impact, but for the moment it does seem to be weighing on the currency."
The Reserve Bank officially acknowledged intervening in foreign exchange markets in 2007 and 2008, during the financial crisis. In 2008, the central bank bought $3.7 billion and in the year before, it bought $300 million, Barclays chief economist Kieran Davies said, adding that the RBA had been trying to stabilise markets.
Unofficially, the RBA was believed to have intervened in foreign exchange markets in 2012 when it accepted an estimated $1 billion deposit from another central bank. Last month it sold $300 million, although the sale could have been characterised as part of its moves to rebuild its reserves, Mr Davies said.
Research on past central bank interventions in currency markets paint a mixed picture on the likelihood of success, he said, with suggestions that intervention "has at best a very short-term effect on the exchange rate".
Mr Horner said he did not expect the bearish mood against the Australian dollar to be sustained, given that a start in the reduction in the Fed's bond purchases program appeared likely to be some months away.