The Australian dollar has opened marginally weaker on Friday as the fastest annual US inflation growth data in 17 years boosted the US unit.
At 0700 AEST, the Australian dollar was trading at $US0.8717/22, down from Thursday's close of 0.8720/23.
During the overnight offshore session, the local currency moved between a low of $US0.8670 and a high of 0.8796.
The US dollar strengthened overnight as the American Labour Department reported that consumer price index (CPI) inflation in July grew at an annual pace of 5.6 per cent, the fastest growth since January 1991.
In July alone, the CPI jumped by 0.8 per cent.
Commonwealth Bank manager of foreign exchange institutional services Tim Kelleher said the steep climb in US inflation convinced traders the US Federal Reserve was more likely to raise interest rates.
"The Aussie and other currencies couldn't rally on the back of it," he said from Auckland this morning.
"I suspect the market thinks (US) rates could theoretically go up quicker."
Mr Kelleher said the Australian dollar reached its offshore highs early in the overnight session after sovereign wealth funds in Asia bought the currency.
But faltering gold prices, which shed $US16.20 to finish at $US808.20 on the New York Mercantile Exchange early this morning, weighed down the local currency.
The Australian dollar finished firmer yesterday for the first time in more than two weeks, after an eleven-day losing streak.
But it fell below Thursday's closing levels again at 0500 AEST before momentarily recovering just before the local sesson began.
"We're underestimating the size of the short US dollar positioning," Mr Kelleher said.
"The US dollar has been in decline for the past six years and maybe the Australian dollar has been overvalued for the past six to 12 months.
"Any rally is seeing sellers."
The Australian dollar was expected to fall to a low of $US0.8650 today as carry traders sold the local unit for the low-yielding Japanese yen.
