By Will Peters

The Australian dollar is forecasted to lose yet more ground in a currency environment increasingly dominated by US dollar strength.

The Australian dollar (AUD) has lost further ground against key rivals on Wednesday; China has been cited as one reason for the declines however the all-round strength of the USD will certainly be inflicting the majority of the damage.

The US dollar to Australian dollar exchange rate is seen half a percent in the red at 16:00 in London; the rate is currently quoted at 0.8923.

The sterling to Aus dollar is meanwhile 0.05 pct lower at 1.8330.

NB: Our AUD quotes are taken from the spot markets; your bank will subtract a discretionary spread when passing on their retail rate. However, an independent FX provider will guarantee to undercut your bank's offer and deliver you up to 5% more currency. Please learn more here.

The Aus dollar weakened against its broadly firmer U.S. peer, pressured by renewed optimism in the U.S. recovery, which put upward pressure on American yields.

Earlier this week, the Aussie had notched one-month peaks against the greenback, which followed last week’s U.S. jobs miss.

The slowdown in Chinese loans abruptly ended the upside correction in the Aussie-complex.

"AUDUSD sold-off below the 21-dma (0.8921), AUDNZD hit 1.0645- pulling out the 1.0648 (2008 low) target. The sentiment in AUD is fundamentally negative and should keep the downside pressures tight in mid-to-long run," says analyst Ipek Ozkadeskaya at Swissquote Bank.

Meanwhile, the divergence between RBA/RBNZ policies and RBA’s determination / intervention for a weaker AUD(with target at 85 cents vs. USD) are solid downside risks.

Swissquote advise that they will remain sellers of the Australian dollar on any rallies.

Ahead, Australia’s labour market will be in the spotlight on Thursday, with the December employment report forecast to show a gain of 7,500 from an increase of 21,000 in November.

The jobs outcome can shed light on the outlook for Reserve Bank policy.

Sterling cedes ground vs dollar on Wednesday

Elsewhere, the British pound was forced onto the backfoot against the rampant USD today.

Sterling ceded some ground to its broadly firmer U.S. counterpart.

The pound has held well below recent two-year peaks against its American peer as some investors see leaks in the notion that Britain might lead advanced economies in raising interest rates.

Britain this week reported for the first time in four years that inflation had finally receded back to its 2% goal.

A trend of moderating inflation can buy central bankers more time to leave rates at record lows to spur a healthier recovery. A key catalyst for the pound looms with Friday’s report on U.K. consumer spending.