The Australian dollar has hit a three-week low against the US dollar as nervous traders move into the safe haven of the greenback ahead of a possible end to the US budget talks.
At 1200 AEDT on Thursday, the local unit was trading at 103.67 US cents, down from 104.09 cents on Christmas Eve on Monday.
In early morning trade on Thursday the Australian dollar dropped to 103.45 US cents, its lowest level since November 21.
Easy Forex currency dealer Tony Darvall said the move in the Australian dollar was because of US dollar strength.
"There are US fiscal cliff concerns that are US dollar positive at the moment anyway," Mr Darvall said.
But he said the Australian dollar was not likely to fall significantly, in part due to its strength against Japan's yen.
The local currency has peaked at a two week high against the yen and the US dollar hit its highest level against the yen since September 2010.
"The Aussie-yen cross rate is a big part of the Australian dollar's support structure," Mr Darvall said.
"You can't get a steep sell in the Aussie dollar if the Aussie rallies against the yen.
"This type of gentle selling in the past three or four days is the type of selling that leads to buying.
"You could definitely see a return to Aussie buying."
US President Barack Obama is reportedly heading back to Washington to resume talks with Congressional leader on how to scale back a series of tax tax hikes and spending cuts that start from January 1.
If they are unsuccessful the new measures could push the US back into recession.
"Obama would not have headed back early if he didn't have the numbers, possibly to do a compromise bill, so it could be bad news as well as good news," Mr Darvall said.
Meanwhile, Australian bond market was slightly firmer at noon.
At 1200 AEDT on Thursday, the December 10-year bond futures contract was trading at 96.690 (implying a yield of 3.310 per cent), up from 96.680 (3.320 per cent) at the local finish on Monday.
The December three-year bond futures contract was at 97.280 (2.720 per cent), up from 97.270 (2.730 per cent).