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Is the Aussie dollar finally finding a floor?

Carla Gottgens | Bloomberg | Getty Images

The Australian dollar has been swathed in bearish sentiment in recent months, but the tide could be turning for the battered currency as analysts find increasing reasons to be optimistic.

Concerns over a slowdown in China, the end of Australia's investment boom and a dovish central bank pummeled the currency to its lowest level since August 2010 earlier this month, a 14 percent decline year to date.

(Read more: It seems the only way is down for the Aussie)

Although the Aussie edged down slightly on Wednesday to $0.8925 as fears over escalating tensions surrounding Syria prompted a bout of risk aversion, traders say the currency has held up relatively well and is expected to start stabilizing over the rest of the year.

(Read more: Syria rattles global markets for second day)

"The broader China slowdown story and the impact that was having on commodities do seem to be running out of momentum for now... and that should support the Aussie," said John Horner, FX strategist at Deutsche Bank.

Sean Callow, senior currency strategist at Westpac bank, said he has been surprised by the relative resilience of the currency compared to other emerging markets amid the recent selloff in the region.

"The Aussie is weaker, but not dramatically so. The scale of the move is fairly modest considering the degree of weakness in emerging market currencies," said Callow, whose one-month forecast stands at $0.90 and $0.92 by year end.

According to a note from Bank of America Merrill Lunch, a combination of better data out of China, no changes to interest rates until February and an expected positive outcome from the upcoming federal election are all supportive factors.

(Read more: Why the Aussie is a 'screaming buy': Economist)

Australian opinion polls have indicated a win for the opposition Liberal-National Party on September 7, which is widely perceived to be market friendly result.

"We...look for a short-term bounce in Australian dollar as business sentiment and China data improve temporarily...A coalition victory is likely to result in at least a short-term bounce in business confidence, given the extent and depth of the disaffection in the business community towards the present government," said BofA.

While Deutsche Bank's Horner expects sentiment to turn round for the Aussie this year, investors should wait a little before buying back in.

(Read more: Are emerging markets facing an 'abyss'?)

"For the moment the pressure we are seeing on emerging market currencies means that it's too early to look for Aussie strength. But once the story does come down [stabilizes] the outlook for Aussie as we head into the fourth quarter should be considerably brighter," he added.

—By CNBC's Katie Holliday: Follow her on Twitter: @hollidaykatie

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