THE Australian share market closed at its weakest levels in almost six years, following a drop in oil and base metal prices and a plunge on Wall Street overnight.

The benchmark S&P/ASX200 index was down 43 points, or 1.35 per cent, at 3145.5, while the broader All Ordinaries index shed 37.1 points, or 1.18 per cent, to 3111.7.

Meanwhile, the Australian dollar also ended lower on Friday.

It was the S&P/ASX 200's weakest close since mid-July 2003.

On the Sydney Futures Exchange at 1617 (AEDT), the March share price index futures contract was 29 points lower at 3140, on a volume of 21,733 contracts.

IG Markets head of institutional dealing Chris Weston said BHP Billiton, Commonwealth Bank and Telstra were among the most heavily traded stocks.

"Financials could not escape the bleak sentiment that was mustered up by their US counterparts ... following a possible Moody's credit downgrade on JPMorgan and Citigroup," Mr Weston said.

"Our domestic banks experienced a heavy sell-off."

Commonwealth Bank was down 33 cents at $27.00, Westpac eased nine cents to $15.70, National Australia Bank was three cents higher at $16.80 and ANZ retreated 29 cents to $12.36.

ANZ and Merrill Lynch have reached an in-principle $253 million settlement agreement with the liquidators of failed stockbroker Opes Prime and the corporate regulator.

Meanwhile, US shareholders of ANZ are mobilising as part of a class action, alleging bank executives made false statements about the Opes Prime saga to inflate the bank's share price.

Mining giant BHP Billiton gave up 66 cents, or 2.33 per cent, to $27.65 while Rio Tinto was down five cents at $45.70.

The Australian dollar ended the local session lower on Friday as investors sold risker assets amid ongoing fears about the US financial sector.

At 1700 (AEDT), the Australian dollar was trading at $US0.6419/23, down from Thursday's close of $US0.6428/31.

During the day, the unit moved between $US0.6365 and $US0.6434.

The Australian dollar opened at $US0.6363/66 at 0700 (AEDT), after offshore markets sold higher risk assets such as the local dollar.

CMC Markets foreign exchange dealer Tim Waterer said the Australian dollar started the local session on the back foot.

"It comes back to that bad news coming out of the (US) financial sector overnight," Mr Waterer said.

"Everyone seemed to reverse funds back to the US dollar and basically the Aussie ended the New York session very weak."

Mr Waterer said the local currency rose during the Asian session as investors booked profits on long US dollar positions.

"That led to the Aussie and the euro creeping a bit higher," he said.

"Also a rise in the gold price around lunchtime gave the Aussie a bit of support."

At 1706 (AEDT), the spot price of gold in Sydney was $US937.55 a fine ounce, up $US26.45, or 2.89 per cent on Thursday's local close of $USS913.10.

AAP, AFP