The Australian dollar has fallen to its lowest level in almost a month as investors move back towards the US dollar and the Euro.
It has since rebounded to be 104.15 US cents at 0630 AEDT on Tuesday, but is still down from 104.49 US cents on Friday, before the Australia Day long weekend.
Overnight, the currency fell to 103.85 cents - its lowest level since January 1.
HiFX senior trader Stuart Ive said the Australian dollar had weakened in recent days after weaker-than-expected domestic inflation figures boosted the likelihood of further interest rate cuts in 2013.
Figures released by the Australian Bureau of Statistics show the consumer price index (CPI) rose by 2.2 per cent in the 2012 calendar year.
The Reserve Bank of Australia has a target range for inflation of two to three per cent annually, which informs its monthly interest rate decisions.
Mr Ive said the Australian dollar was also suffering due to improved economic outlooks in the US and Europe.
"Markets seem to be stabilising a little bit more and that's why you are seeing some of the money invested in the Australian dollar coming out a little bit," he said.
Both the US dollar and the euro have gained ground against the Australian dollar in the past week.
Mr Ive said the main drivers for the currency this week would come from the US, especially a meeting of the US Federal Reserve's policy setting arm, the Federal Open Market Committee (FOMC), on Wednesday.
"The key for the Australian dollar is going to be the FOMC. We've seen a stream of better data out of the US. We'll see if that is continued through to improved sentiment from the Fed," he said.