At 12noon (AEDT), the Australian dollar was trading at $US0.7192/96, down about US3c, or 4.05 per cent, from yesterday's close of $US0.7495/98.
During the morning, the local currency traded between a low of $US0.7092 and a high of $US0.7260.
The Australian dollar had opened the local session around $US0.7203, according to IRESS data, after reaching a four year low of $US0.6985 during the overnight session, before regaining some lost ground as local markets opened.
Societe Generale chief foreign exchange dealer Paul Milton said the currency had moved "too far, too soon'' overnight, prompting this morning's partial recovery.
"The move was not based on anything concrete enough to make it stick, to make it sustainable,'' Mr Milton said.
:It was basically a broad risk aversion play that gathered a great deal of momentum and just couldn't be stopped.
"The move this morning is the market just correcting itself a little bit.''
Investors continued to ditch riskier assets overnight as stock markets in Europe and the US recorded substantial falls and commodity prices weakened.
The Australian dollar has lost 10 per cent of its value against the US dollar since Friday, when it closed the local session at $US0.7799/05.
Mr Milton said the unit was likely to face further pressure this afternoon, following the Reserve Bank of Australia's (RBA) monthly board meeting and interest rate decision.
Mr Milton said he expected the Australian dollar to revisit this morning's low of $US0.7000 if the RBA announces a 50 basis point cut at 2.30 (AEDT).
Macquarie Group interest rate strategist Rory Robertson expects the RBA to cut the cash rate by 50 basis points this afternoon and repeat the move after its November board meeting.
"If rates are not brought down by one to two percentage points reasonably quickly, the Australian economy almost certainly will go into recession within 12-18 months,'' Mr Robertson said.
"The RBA seems likely to cut its cash rate all the way back to 4.25 per cent within two years.''
