The Australian dollar opened lower as a slightly weaker Wall Street saw risk-related currencies sold off overnight.
At 0700 AEDT, the Australian dollar was trading at $US0.7017/21, down from yesterday's close of $US0.7106/11.
Overnight, the local currency traded between $US0.6937 and $US0.7239.
Bank of American currency strategist John Rothfield said risk-sensitive currencies such as the Australian dollar had been sold as US equities had failed to continue their rally after the US government announced it would buy shares in troubled banks.
Overnight, the US government announced it would invest up to $US250 billion ($A360 billion) in shares of nine large banks including Citigroup, Bank of America and JP Morgan Chase.
Washington said it would also guarantee bank debt and interbank lending temporarily.
US Treasury Secretary Henry Paulson said the actions had been necessary to restore confidence in financial markets with banks to resume lending capital to stimulate the economy.
"Government owning a stake in any private US company is objectionable to most Americans - me, included," Mr Paulson said.
"Yet the alternative of leaving businesses and consumers without access to financing is totally unacceptable."
Mr Rothfield said the market's sentiment towards risk had been the driver for currencies such as the Australian dollar, not their domestic economic news.
"If you look at what is going on with the Australian dollar, the Brazilian real, the Mexican peso, it is not Mexican retail sales, Brazilian industrial production or Australian consumer confidence," he said from San Francisco.
"It is all related to global risk appetite."
Wall Street closed lower after yesteryday's massive gains despite major European markets ending at least 2.5 per cent higher.
The Dow Jones Industrial Average ended down 0.82 per cent and the hi-tech Nasdaq index was 3.54 per cent lower.
"Obviously, people were pretty happy early in the day that the US government had followed the European standard of buying equity stakes in US banks, but there was no follow through" he said.
"Some of the currencies being bid on equity market strength in the last couple of days faltered again pretty quickly."Today's only local datum is the Westpac/Melbourne Institute leading index of economic activity for August.
Mr Rothfield said risk appetite would be the sole driver of the Australian currency today.
"If Asian equity markets see no follow through in the US, people will sell out and the Aussie will go down," he said.
"There could be some profit-taking and we could get back into the high-60s."
