Dealers estimated the Reserve Bank of Australia had bought between A$1 billion (US$610 million) and A$3 billion overnight in London and New York, trying to prop the Australian currency up against the weight of selling by the US banks.

"There are some serious US investment houses looking to break the Bank and force the sort of massive depreciations suffered by the (Thai) baht and (South Korean) won," said an Australian bank dealer.

By 9.15 am (2315 GMT) the Australian dollar was teetering just below Thursday's local finish of 61.10 US cents. The currency has plunged by 10 per cent in the past two months and by 21 per cent in the last year from 77.50 US cents in May 1997.

In a seesaw offshore session, it bounced from a 12-year low of 60.70 cents in London to 61.55 cents in New York as the RBA kept intervening. But it reeled back under freshselling from US investment banks, hedge funds and options players.

It was also sideswiped by a slide in the New Zealand dollar after Moody's credit-rating agency put the country's sovereign debt ratings on watch for a possible downgrade.

The New Zealand dollar skidded to a fresh five year trough of 51.93 US cents on Friday morning from 52.60 offshore.

In an unusual move, RBA governor Ian Macfarlane entered the fray, using a speech in London to confirm the bank's intervention and quash speculation of a cut in Australian official interest rates, saying an easing was very unlikely.

He acknowledged that the Asian economic crisis was bound to push down the Australian currency, but added, "an overshooting would be in no one's interest."

He joined market analysts in Australia in defending the domestic economy as fundamentally sound, free of the weaknesses that gave traders reason to dump south-east Asian currencies over the past year.

But US traders were unimpressed. Some 60 per cent of Australia'sexports go to Asia and the foreign exchange market is focused on a likely blowout in the country's current account deficit to around six per cent of economic output this year.

Besides, the Australian dollar market is big enough to make it an attractive proxy for the less liquid currencies of the countries at the heart of the Asian economic meltdown.