The Australian dollar slipped against the US dollar on Monday, as markets fretted about more disappointing attempts by European policymakers to solve their crippling sovereign debt crisis.
The euro zone's familiar woes once again prompted investors to look for safety and reduce their exposure to the risk of stocks, and the high yield, commodity currencies.
The Aussie slipped about 1 per cent toclose locally at $1.0245, as investors reacted badly to an unproductive European Union meeting in Poland.
"It's all selling from the opening bells this morning," said a trader at a foreign bank in Sydney.
A cancellation of a visit by Greek Prime Minister George Papandreou to the United States to chair an emergency cabinet meeting, and a regional election defeat for Germany's chancellor Angela Merkel added gloom to an already tense situation.
"It's just showing how disjointed everyone is and markets are reflecting the uncertainty," the same trader added.
Investor attention is turning to Federal Reserve's policy-setting committee, which will meet on Tuesday and Wednesday to discuss what, if anything, the central bank should do next. The popular idea is that the Fed would sell short-dated maturities and buy longer ones.
The Aussie easily broke through $US1.0263, the 61.8 per cent Fibonacci of the $US1.0178/$US1.0399 move and was now heading towards a major barrier at $US1.0175/85, where a double bottom has formed. It was last at $US1.0240.
Talk of Asian sovereign accounts selling both the Aussie and euro also weighed on risk currencies, according to traders. Trading was thinned, however, with Japanese markets closed for a public holiday.
Australian exporters showed no signs of buying the currency after its latest dip.
"The difference today, from last week, is that when the Aussie went down, there was good exporter demand, now that demand isn't really in the market until $US1.0100-$US1.0150, it's still another cent away," the trader added.
The Aussie has lost 4.1 per cent this month and some analysts are pessimistic on the medium-term.
Commonwealth Bank of Australia's currency strategist Joseph Capurso anticipates the Aussie to test $US1.0000 by the end of the week. The Australian dollar has been above parity since March and only dipped under it for a few hours in August, when it bottomed at $US0.9927.
Heightened risk aversion saw the Aussie weaker against most currencies, including the wobbly euro. The single currency managed to nudge up to $1.3333 , having struck a 6-month trough of $1.0313 last week.
Elsewhere, the Australian dollar lost ground against the yen, pound, Swissy and kiwi.
Reuters