The Australian dollar managed a mild bounce on Tuesday after a sea change in sentiment towards the US dollar and euro pushed the currency to an 18-day low of 75.29 US cents.
The move wiped out most of the currency's four percent New Year rise to a high of 78.13. However, the Aussie was back at $0.7580/85, little changed from $0.7578/83 late on Monday.
The Aussie was the star performer of 2003, gaining 34 percent as investors sought a reliable alternative to the greenback, which is plagued by the United States' record current account deficit.
"We see this bounce in the US dollar as counter trend. But equally given the sheer magnitude and time of the previous move lower in the US dollar, higher in euro et al, we think this not a one-week wonder," said Greg McKenna, strategist at National Australia Bank.
Traders said interest in the Aussie emerged at the lows on Tuesday as the euro steadied after sharp losses.
Many expected the Aussie to continue to struggle though as jittery investors, heavily short greenback, await a meeting of the Group of Seven economic powers on February 6-7.
The euro has fallen to a three-week low of $1.2331 this week, from a record high of $1.2898 a week ago, after European Central Bank officials tried to slow the pace of the euro's rally through public comment.
The euro and Aussie often move in unison as they both offer a relatively stable alternative to the greenback, and therefore go in and out of favour together.
Last week's US dollar rally was the best since March 2001.