THE Australian dollar has closed weaker, dropping to a three-week low in a market gripped by escalating risk aversion.
At 5pm (AEDT), the Australian dollar was trading at 63.52 US cents, down almost one US cent, or 1.5 per cent, from yesterday's close of 64.47 US cents.During the day, the local unit moved between a low of 63.32 US cents and a high of 64.68 US cents.
Meanwhile, the Australian sharemarket closed at fresh four year lows, wiping $41 billion from the value of stocks, as forced selling dragged all sectors down.
The benchmark S&P/ASX200 index closed down 146.7 points, or 4.19 per cent, at 3,352.9, its lowest level since May 17, 2004.
The broader All Ordinaries index shed 150.6 points, or 4.32 per cent, to 3332.6, its lowest level since February 11, 2004.
They were the biggest daily falls for both since Thursday last week and more than 50 per cent below their all-time highest closes on November 1, 2007.
Yesterday the market also closed at four year lows, the lowest levels since August 2004.
On the Sydney Futures Exchange the December share price index futures contract ended down 146 points at 3,398 points on a volume of 43,038 contracts.
Macquarie Private Wealth adviser Helen Spencer said the negativity stemmed from overseas, following Wall Street's lowest close since 2003.
"There's no doubt we're still taking on a lot of the negative sentiment from offshore, you can't obviously ignore such a fall in the US," Ms Spencer said.
Weakness in commodity prices hurt the major miners.
BHP Billiton fell $2.10, or 9.05 per cent, to $21.10 while its takeover target Rio Tinto gave up $8.65, or 13.13 per cent, to $57.25.
Bell Potter senior adviser Stuart Smith said most trade, on another day of relatively low volumes, came in the form of forced sales.
"It's forced selling. There can be no other reason," Mr Smith said.
"The market's trying to find an absolute floor. It will happen ... but when is the story."
AAP