The Australian dollar slipped on Thursday as some investors looked to lock in profits as year-end approaches after a long rally carried it to 15-month highs.
At the local close, the dollar was trading at $US0.9240, down from $US0.9292 seen here late Wednesday. It also lost ground on the yen to 82.33, from Wednesday's 82.86 yen.
Traders said the Aussie has been hit by waves of profit taking this week after hitting a peak of $US0.9407 on Monday.
Many banks and hedge funds have made hefty profits on risk trades this year and are keen to book them.
One trader said there were also festering worries weaker equities may be flagging a turn in demand for riskier assets.
"There is a questionable performance from stock markets across Asia," said David Scutt, a trader at Arab Bank. "It looks like risk is off."
The Aussie has traditionally been seen as a risky currency because it is prone to wild moves in a short span of time, in part because it is one of the few liquid currencies in the Asian region, and due to Australia's reliance on commodity exports.
Westpac said this week the Aussie was most vulnerable among G10 currencies to suffer losses against the US dollar when investors avoid risky assets.
Among 18 currencies in developed and emerging economies, the Aussie was ranked as second-most vulnerable to turns in risk. The Philippine peso was seen as most vulnerable.
But Westpac advised its clients to take advantage of any weakness in the Aussie to buy the currency, a view echoed by Goldman Sachs.
"Within the commodity bloc, the Aussie remains our preferred currency," Westpac said.
The Aussie has enjoyed the limelight in currency markets due to rising local interest rates. At 3.50 per cent, Australian rates are the highest in the developed world. Traders think they will climb another 25 basis points next month. Goldman recommended clients to buy the Aussie at $US0.91, with a target of $US0.95.
Most of Asia's major stock markets fell on Thursday, with Japanese stocks hitting a four-month low.
US stock futures were in the red as well. That lifted demand for safe-haven bonds.
Australia's December bill futures rose 0.01 point to 95.89. Three-year bond futures climbed 0.07 points to 95.07, and the 10-year contract added 0.06 points to 94.57. Cash yields fell however.
Three- and 10-year cash yields fell to their lowest levels in over a month. The spread between one- and three-year swap yields hit a seven-month low of 81 basis points.
