Have the Aussie dollar bears won the argument?

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Despite a long downtrend in commodity prices, the Australian dollar has managed to keep a loyal set of diehard fans among currency traders and analysts -- but now some of them are throwing in the towel.

"We've been constructive on Australian dollar throughout 2014, consistently forecasting it to be the relative G-10 outperformer after the U.S. dollar," Geoffrey Kendrick and Vandit Shah, analysts at Morgan Stanley, said in a note last week.

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But since the payrolls data release last month, the bank's bullish assumptions have been called into question. Morgan Stanley cut its forecast for the Australian dollar to $0.84 by the end of 2014 and $0.76 by the end of 2015, a sharp drop from its previous expectation of $0.95 by the end of this year and $0.88 by the end of next.

A number of analysts have long been calling for the Aussie to fall as low as 80 cents - a level it hasn't seen since 2009 - as economic fundamentals come back into play, and the central bank continues to talk the currency lower. Over the past year, Reserve Bank of Australia Governor Glenn Stevens repeatedly voiced his opinion that he would like to see the Aussie at 85 cents against the U.S. dollar.

Read More Australia frets as property blows hot at home, cold in China

The Australian dollar is fetching $0.8655 in early Monday trade, down a bit more than 7 percent since the beginning of September, touching its lowest levels since January.

Morgan Stanley's bullish call had been premised on the assumption that non-resident buyers of Australian government debt and Japanese buyers of Australian-dollar assets would remain keen, as well as an expectation that the country's terms of trade would stabilize.

But with U.S. yields starting to rise again and increased volatility in markets, Australian government bonds became less attractive, Morgan Stanley said adding that it expected the Aussie dollar to depreciate further "especially with G-10 foreign exchange becoming increasingly sensitive to moves in the belly of the U.S. curve."

In addition, prices of Australia's main commodity exports, especially iron ore, continue to deteriorate, and the trade balance isn't likely to return to a surplus until 2016, when liquified natural gas exports are likely to pick up, the bank said. It also expects the recent weakening in China's economic data may herald a protracted slowdown in the mainland's import demand.

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Morgan Stanley isn't alone in stepping back its expectations for the Aussie dollar.

HSBC has cut its forecast to $0.82 for the end of 2015, from $0.86; it kept its expectation the Aussie would fetch $0.86 at end-2014.

"We are only at the early stages of a U.S. dollar bull run," HSBC said in a note last week. In addition, Australia's central bank has been trying to talk down the currency, it noted.

"Australia wants a weaker Australian dollar to help with the economic rebalancing away from a reliance on mining," HSBC said. "The RBA (Reserve Bank of Australia) will likely continue to counteract Australian dollar rallies with verbal intervention."

Read More RBA keeps rates steady, says China housing a concern

Others think the weakness may only be temporary.

"Impending Federal Reserve rate hikes and consequent U.S. Treasury yields hardening and rising U.S. dollar have induced 'carry' unwind to durably unravel Australian dollar longs," Mizuho said in a note last week. Heading into the expected rate hikes, it forecasts the Australian dollar will weaken to below $0.85, before finding some support at $0.83.

But it added, "Quantitative easing-type stimulus from the European Central Bank and Bank of Japan alongside prospects for more aggressive infrastructure stimulus in China will partly offset Australian dollar headwinds," likely priming a soft bounce back toward $0.90.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1