The Australian dollar slid below $US0.92 on Friday after more investors hurried to lock in gains in one of the year's best-performing currencies.
At the local close, the dollar was trading at $US0.9197, having slid as low as $US0.9151, down from $US0.9240 seen here at Thursday’s close, and well off a 15-month high of $US0.9407 hit on Monday.
The drop is threatening a major upward trend channel that goes all the way back to March, when it was languishing at 63 cents.
"The Aussie's break below $US0.9180 is significant and points to further losses," said Patrick Bennett, an analyst at Societe Generale in Hong Kong. He said the Aussie could fall as far as $US0.9030-$US0.9050.
Against the yen, the dollar weakened to 81.79, from Thursday's 82.33 yen and well under a high of 84.22 yen hit last week. Profit-taking also hit most Asian stock markets on Friday, dragging share prices lower.
Australian bond futures benefited however. December bill futures added 0.03 points to 95.93, and three-year bond futures rose 0.05 points to 95.13.
Australia's sturdy economy and rising interest rates have helped fuel a 31 per cent rally in the Aussie, ranking it the best performer among the world's most actively traded currencies.
Many traders have earned handsome profits this year buying the currency.
The latest data from the Commodity Futures Trading Commission show the local dollar is the most popular "buy" among speculators.
The stellar rise is not without a price. Some analysts say the Aussie is now most vulnerable to a sharp drop since it has risen the most.
Collin Crownover, the global head of currency management at State Street Global Advisors, said the Aussie is around 20 per cent over-valued. But Crownover said that is unlikely to keep the Aussie from grinding higher to hit one-to-one against the US dollar over the next six months, owing to a rosy local economic outlook.
Thereafter, however, the Aussie will be highly susceptible to snapping back because it will be 30 per cent over-valued. "People at that level might pause and say even though it has a great growth profile, it's a bit rich," Crownover said.
According to Westpac, the Aussie, the New Zealand dollar and the Swedish crown were most vulnerable to an abrupt pull-back.
