Just as the Australian dollar attempted to make a concerted rebound against the U.S. dollar this week, the prospect of further monetary easing in Australia has provided traders with another reason to dump the currency.
The Reserve Bank of Australia (RBA) on Tuesday left its key interest rate unchanged but maintained an easing bias.
(Read More: Australia Holds Fire on Rates, but for How Long)
That prompted the Aussie to give up an overnight gain of 2 percent against the dollar on a weak U.S. manufacturing survey and on Wednesday it hit a session low of $0.9603 after weaker-than-expected Australian economic growth data, moving within sight of a 19-month low hit last month.
"The fact that the Aussie dollar gave up all of that big bounce we saw on Monday against the U.S. dollar shows just how negative sentiment towards the Aussie is right now," said Ray Attrill, co-head of foreign exchange strategy at National Australia Bank.
"It is still the whipping boy of the currency market," he added.
The reaction in the Aussie dollar to the prospect of further monetary easing is a sharp contrast to its performance last year when four interest rate cuts from the RBA failed to dent the appeal of the robust currency.
But the Aussie has fallen out of favor with investors in recent weeks as a fall in commodity prices, signs of weakness in the economy and a better outlook for the U.S. economy spark Aussie dollar bashing.
(Read More: Is It All Downhill for Commodity Currencies)
Australia's economy grew an annual 2.5 percent in the first quarter, compared with expectations for a 2.7 percent rise, data on Wednesday showed.
"There is no scope for monetary policy expectations to support the Aussie dollar anytime soon," analysts at Credit Agricole said in a research note. "Given still weak global growth prospects, the commodities sector is unlikely to recover anytime soon… We still advise against speculating on a change to the last few weeks' Aussie dollar trend."
Australia's dollar is down almost 9 percent from an April peak and is the second worst performing major currency this year after the Japanese yen, which is down more than 16 percent against the greenback.
Significantly, the RBA said in its policy statement on Tuesday that the Aussie dollar remains high despite its recent depreciation.
"They are either not satisfied yet with the depreciation or want to hold onto it as much as possible by not saying anything that could threaten its decline," Kathy Lien, a managing director at BK Asset Management in New York wrote in a note.
(Read More: Goldman Warns of Big Move in Australian Dollar)
Analysts say the Aussie dollar is key to the outlook for interest rates since further weakening in the currency could encourage the central bank to keep monetary policy steady after cutting rates 200 basis points since late 2011 to boost economic growth.
If you look at the Aussie dollar's value in terms of the decline in the price of Australia's main exports such as iron ore, the currency should be trading closer to a range of $0.85 to $0.90, analysts at Mizuho Corporate Bank said.
- By CNBC.Com's Dhara Ranasinghe, Follow her on Twitter: @DharaCNBC