The Australian dollar has opened lower, dropping back below $US0.8700 as crude oil prices fell and the market suffered a fresh bout of risk aversion.
At 0700 AEST, the Australian dollar was trading at 0.8680/85, down from yesterday's close of 0.8746/50.
During the overnight session, the local currency traded between a low of $US0.8673 and a high of 0.8745.
The Australian dollar was higher in early trading overnight, but gave up its gains as crude oil prices eased and worries about US financial stocks hit equity markets.
Crude oil for September delivery lost $US0.90 to settle at $US112.87 a barrel, after it reached an intra-day high above $US115.
US prices for heating oil and gasoline also finished lower, while the Dow Jones Industrial Average lost 1.55 per cent.
Bank of America senior currency strategist John Rothfield said the fall in commodity prices had hurt the Australian dollar.
"I think it comes back to the general underperformance of the commodity currencies as the day went on and a little bit of an increase in risk aversion as reflected by the fall in the stock market, particularly the financials," Mr Rothfield said from San Francisco.
The Australian dollar reached a 25-year high of $US0.9849 on July 16, but dropped 12.8 per cent in less than a month, falling to $US0.8593 on August 13.
Bank of America has forecast the Australian dollar to finish 2008 at $US0.9400.
"We believe that the concern in the market about the Australian commodity story and the banking story has been overdone," Mr Rothfield said.
"We think that the rebound in the US dollar in general has overshot."
The Reserve Bank of Australia (RBA) is due to release the minutes of its August 5 board meeting at 1130 AEST.
The RBA left the cash rate unchanged at 7.25 per cent in August for the fifth straight month, but signalled in its quarterly statement last week that there was increasing "scope" for a less restrictive stance on monetary policy in the period ahead.
Also, the Australian Bureau of Statistics releases merchandise imports figures for July at 1130 AEST.
