THE Australian dollar closed 3.3 US cents lower as continued fears about a global recession had investors dumping riskier assets such as shares and high-yielding currencies.
At 1700 AEDT, the Australian dollar was trading at 65.95 US cents, down from yesterday's close of 69.25 US cents.
During the day, the local currency traded between 65.38 US cents and 68.83 US cents.
CMC Markets foreign exchange dealer Tim Waterer said the steep fall in Australian share markets and very thin trading weakened the currency.
Overnight, Wall Street plunged to five-year lows on worries about the deteriorating global economy.
Financial bears swiped Asian sharemarkets today as ongoing fear gripped investors, with the local bourses plummeting to their lowest levels since May 2005.
The All Ordinaries index had its biggest one-day percentage fall, 8.20 per cent, since Black Monday in October, 1987.
Asian markets were in the red, with Japan's Nikkei down 9.6 per cent, Singapore's Straits Times index 7.55 per cent lower and Hong Kong's Hang Seng 8.09 per cent poor by AEDT 1755.
"A combination of the 360 point fall on the Australian stockmarket, and low liquidity conditions have been the main contributing factors to the Australian dollar fall," Mr Waterer said.
"We are seeing quite extreme movement due to low liquidity.
"It is quite extreme for a currency to be moving three-four cents in a session, and that is what we have been witness to all week."
The Australian dollar/Japanese yen cross trade, a barometer of the risk level in markets, has plummeted to six-year lows this year.
Since the end of last Friday's local session, the Australian dollar has shed 20.57 per cent against the Japanese yen.
AAP
