The currency was caught in the backwash of a heavy fall in the New Zealand dollar after a bigger-than-expected interest rate cut on the other side of the Tasman by the Reserve Bank of New Zealand.

Late yesterday, the Australian dollar was trading at US79.56c, down from US80.77c, marking the lowest close since August 17 last year.

The dollar also finished below 86 yen for the first time since July 2006.

The dollar struggled after the NZ central bank cut interest rates by 50 basis points, taking the cash rate to 7.5pc.

The dollar rose above US80c in late morning trade, from a low of US79.45c, after Bureau of Statistics data showed the jobless rate fell in August to a five-month low of 4.1 per cent, but it sagged later in the day.

The seasonally adjusted data was better than forecasts of a 4.4pc unemployment rate.

Yesterday's fall is the latest in a slide by the Australian dollar of more than 20pc in the past two months from a peak above US98c in July.

Strategists at National Australia Bank believe the dollar is heading towards US77c in the coming weeks.

Westpac's chief currency strategist, Robert Rennie, said the Australian dollar had been "overly beaten up" by global foreign exchange markets.

In volatile times, US investors often abandoned international markets, he said. As they did, they bought the US dollar and sold foreign currencies, including the Australian dollar.

"It's just a good old-fashioned 'let's bring the money home'," Mr Rennie said.