The Australian dollar closed at a one-month low, shedding almost two US cents, as another day of losses on Wall Street and sharp commodity price drops turned traders off high-yielding currencies.

At 1700 AEDT, the Australian dollar was trading at $US0.6744/49, down 1.9 US cents, or 2.78 per cent, from Monday's close of $US0.6938/42.

This was the weakest end to the session since December 16, when the unit finished a touch under $US0.6700.

During the day, the local currency moved between a four-week low of $US0.6738, hit in the early afternoon, and an opening high of $US0.6825.

The Australian dollar lost momentum within the first hour of local trade as New York's S&P 500 index closed weaker for the second straight day, shedding 2.26 per cent on Monday night.

Equity market gloom spread to Australia, with the broadly based All Ordinaries index finishing 0.83 per cent weaker as resources stock bled.

Commodity prices took a hit, with copper prices shedding 4.55 per cent and crude oil prices falling by more than two per cent to less than $US37 a barrel.

A currency analyst with financial markets research group Forecast, Lee Wai Tuck, said the combination of falling share markets and commodity prices weakened investor demand for risky assets like the Australian dollar.

"It's a bit of risk aversion," Mr Lee said from Singapore.

"Market players will be cautious and they will reduce their risks, and pare back their speculative positions."

The Australian dollar recovered from its daily lows in the afternoon, but stayed below $US0.9800, as Standard and Poor's reaffirmed Australia's AAA foreign-currency credit rating.

Mr Lee predicted the domestic currency would climb back to $US0.6850 during offshore trade as the positive credit rating encouraged traders to buy the Australian dollar on the dips.

Australian housing finance data for November was expected to put the local currency under pressure on Wednesday.

While the data is not considered market moving, financial markets are continuing to price in an aggressive interest rate cut from the Reserve Bank of Australia (RBA) in February.

At 1600 AEDT, the Reserve Bank of Australia's trade weighted index was at 55.2, down from Monday's close of 56.1.