The Australian dollar has opened more than one US cent lower as risk averse investors sold the currency overnight.
At 0700 AEST, the Australian dollar was trading at $US0.8226/30, down from yesterday's close of 0.8353/57.
By 0744 AEST, it had fallen dramatically again to $US0.8171/78.
Overnight, the local currency traded between $US0.8216 and US0.8403.
It was the local dollar's lowest opening since September 6 last year, when it started the local session at 0.8216/22.
Bank of America currency strategist John Rothfield said the fall on Wall Street overnight had stimulated risk aversion which saw a sell-off in the Australian dollar.
US equities slumped as weak retail data indicated more job losses could follow and raised fears about the US economy.
The Dow Jones Industrial Average skidded 2.99 per cent to end at 11,188.23, its lowest close since late July as the blue-chip index moved into "bear market" territory, down 20 per cent from last year's highs.
The Nasdaq composite index slid 3.2 per cent and the broad-market Standard & Poor's 500 index shed 2.99 per cent.
Mr Rothfield said the increase in risk aversion had the market selling commodity-driven currencies such as the Australian dollar.
"The US stock market is down around three per cent and the Asian equities have been a bit down," Mr Rothfield said from San Francisco.
"The market risk aversion has been on the rise.
"That has fed through to some under-performance by the Australian dollar and some other high-yielding commodity currencies."
The Australian dollar plunged more than three per cent against the Japanese yen to an overnight low of 88 yen.
The Japanese currency benefits in times of raised risk aversion, Mr Rothfield said.
"More of that is all part of that game where increased risk aversion you tend to get yen buying on the crosses," he said.
Mr Rothfield said the fundamentals to support the Australian dollar were still there but its ongoing fall was based on the world economic outlook.
"We like the Australian dollar fundamentals, the currency is oversold on some key crosses," he said.
"But in a risk averse environment it is very difficult to find any traction right now.
"It depends on the overall global environment for how far this retracement in the Australian dollar goes."
