The Australian dollar trimmed gains on Wednesday as soft regional stockmarkets led investors to turn away from risk and take profits after the previous day's surge.
At the local close, the dollar was trading at $US0.8483, off a high of $US0.8559 hit offshore on Tuesday, but above yesterday’s close of $US0.8453.
One trader at a major Australian bank said selling in the Aussie dollar was quite even across the range of investors.
"Investors remain cautious about taking on risk at the moment," Barclays said in a note to clients, adding the options market showed investors were on guard for further weakening in commodity currencies, rather than sudden appreciation.
As such, Barclays argued, the market could hereon be more responsive to positive news, compared to negative ones.
That could lift the pair of currencies that have been hurt by worries the world economy may suffer a second recession.
For the Aussie dollar, the hourly chart showed it may face resistance at $US0.8589, the 50 per cent Fibonacci retracement of its drop from $US0.8859 to $US0.8319.
Anxiety about the prospects of world growth have hurt equity markets, taking a further toll on the Australian dollar which tends to mirror the performance of Asian shares.
ThomsonReuters data showed the one-month, 90-day and one-year correlation between the Asia MSCI stock index outside Japan and each of the two currencies were strong above 0.80.
Reuters