The Australian dollar has fallen to its lowest level since October 2011 amid weakness on global stock markets, with Wall Street diving more than one per cent overnight.
London’s FTSE fell 1.8 per cent.
The currency dropped to a low of 95.11 US cents early on Thursday morning.
It recovered slightly and was trading at 95.46 US cents as local day trading started.
The dollar has lost more than two-and-a-half cents since Tuesday.
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HiFX senior dealer Dan Bell said the currency fell overnight as sharemarkets in the US, the UK, France and Germany recorded heavy losses.
“There was a general turn in investor sentiment,” he said.
“It was a classic risk-off move. The US dollar gained due to its safe-haven status and currencies like the Aussie weakened,” he said.
Bell said the Australian dollar could regain some ground during Thursday’s local session, but was likely to face further downward pressure over the coming days and weeks.
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The US stock market fell sharply with the Federal Reserve’s Beige Book report showing little fresh momentum in the US economy.
“Disappointing US economic data raised fresh concerns about the outlook for Friday’s non-farm payrolls report and these worries have led to profit taking in the currency and equity markets,” said Kathy Lien of BK Asset Management.
The Fed’s Beige Book, a snapshot of US economic conditions based on a nationwide survey, reported the economy continues to grow at a “modest to moderate” speed, suggesting steady but still slow expansion.
“Their lack of clear optimism kept pressure on the US dollar and US stocks,” Lien said.
Wall Street stocks dived more than one per cent overnight, pushing the Dow Jones Industrial Average below 15,000 for the first time in a month.
Europe’s main stock markets also dipped, with sentiment hit by heavy losses in Tokyo and weak eurozone data on the eve of an interest rate decision from the European Central Bank (ECB).
Markets were also hit by official data showing the 17-nation eurozone stuck in recession for a sixth consecutive quarter in the first three months of 2013.
London’s FTSE 100 index of top companies on Wednesday fell 1.18 per cent to stand at 6,481.55 points in late morning deals.
Frankfurt’s DAX 30 reversed 0.80 per cent to 8,230.28 points and in Paris the CAC 40 shed 0.91 per cent to 3,890.03.
Across in Asia, Tokyo stocks tumbled 3.83 per cent to close at a two-month low point on Wednesday after Japanese Prime Minister Shinzo Abe disappointed markets in a closely-watched speech on pumping up the nation’s economy.
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