Following months of heavy selling, the Australian dollar regained some lost ground after the central bank sounded more hawkish at its first policy meeting of the year, but is the worst truly over for this battered currency?
The Reserve Bank of Australia (RBA) held interest rates steady at 2.5 percent on Tuesday, as expected, but traders focused on the removal of the 'easing bias' from its policy statement, a move which sent the Aussie surging to 1.7 percent against the U.S. dollar to $0.8896.
Kathy Lien, managing director of FX strategy at BK Asset Management, said the bounce could mark the beginning of good times for the battered currency, which was one of the worst performers in the forex league tables last year.
(Read More: Australian dollar has a huge day, thanks to RBA)
"After selling off for the past three months with virtually no relief rallies, we believe that the Australian dollar has officially bottomed," said Lien.
"By dropping their easing bias, the RBA set off a wave of short covering in the Australian dollar last night that we expect to continue in the weeks to come. In fact we are looking for another 4 to 6 percent rally in the currency," she added.
A number of negative headwinds have hurt sentiment for the Australian dollar, which has fallen over 16 percent since hitting a high of $1.0598 last April.
(Read more: Is the euro headed for an Aussie-style crash?)