The Australian dollar was about 1% weaker at noon as Argentina's plan to take over pension funds hurt risk-based currencies.
The local currency came under more pressure after expectations of more euro-zone rate cuts pushed the euro to a two-year low against a resurgent US dollar.
At midday, the Australian dollar was trading at $US0.6624/28, down from yesterday's close of $US0.6687/92, marking a 32.7% decline since mid July when the currency hit a 25-year high of $US0.9849.
During the morning, the local currency moved between a low of $US0.6608 and an early high of $US0.6776, a 1.6% range.
The dollar slipped to 64.64 yen from 65.12 in New York, but having already lost 40 yen in three months, traders suspect there are few long Aussie positions left to liquidate.
In a volatile session, the Australian dollar opened marginally weaker, surged in the first hour of trade before falling again as Argentina's plan to nationalise the nation's $US30 billion ($44.3 billion) pension funds stirred worries about the global economy.
Argentina's main stock exchange index plunged 16% as financial markets worried about the South American economy once again defaulting on its debts.
Westpac currency strategist Jonathan Cavanegh said concerns about the credit crunch infecting emerging economies hurt the Australian dollar as traders worried about a global growth slowdown.
"People are just shutting risk trade left, right and centre: that's never a good environment for the Aussie,'' he said. "We're (the Australian dollar) not considered a safe haven: we're linked with the fortunes of the global economy.''
The Australian dollar faced more pressure as the euro dropped to its lowest level against the US dollar since November 2006.
Traders began thinking of more European interest rate cuts after European Central Bank executive board member Jose Manuel Gonzalez-Paramo said euro zone rates could be cut without adding to inflation.
Slides of more than 5% on Wall Street have translated into a 4% drop in the Australian sharemarket today.
Mr Cavenagh said weak risk appetite could push the Australian dollar below $US0.6600 today, to possible low of $US0.6550.
The currency last hit that level on October 16, five days after the Australian dollar had reached a five-year low of $US0.6331.
The Australian bond market was firmer at noon.
The yield on the Commonwealth Government March 2019 bond was at 5.032%, down from yesterday's close of 5.120%, while the yield on the June 2011 bond was at 4.295%, down from 4.430%.
On the Sydney Futures Exchange, the December 10-year bond futures contract price was at 94.950, up from yesterday's close of 94.860, while the December three-year contract price was at 95.670, up from 95.520.
AAP
