The Australian dollar has dropped nearly 1 cent to a fresh low against the US dollar and currency experts say it could fall further after the world's biggest central bank hinted that the first interest-rate increase in the United States in seven years could happen in April.
The local currency has fallen 1.18 per cent and is trading at 81.1 US cents, the lowest it has been against the US dollar since June 2010.
Australia and New Zealand Banking Group senior currency strategist Daniel Been said in a morning note to investors that "The [Aussie dollar] forged a new low as the US dollar pushed broadly higher. With little domestic news today, this trend is likely to continue. China's property price data will be of interest, however it is unlikely to impact on the [local currency]."
The surge in investor interest in US dollars overnight came after the Federal Reserve dropped the use of its closing monitored "considerable time" language in respect to the timing of record low rates. Instead it replaced the words with a promise to be patient on the timing of an interest-rate increase, and raised its assessment of the labor market.
At a press conference, Fed chair Janet Yellen Yellen was asked to elaborate on a statement in which Fed policy makers said it was "unlikely" the economy would show enough vigour to justify the first rate increase since 2006 "for at least the next couple of meetings."
Ms Yellen clarified that rate changes were unlikely in the next two meetings, which the market has taken to mean the third FOMC meeting of the year on April 28-29 might pull the trigger for higher rates.
The change in language is seen as another step in the Fed's plan to end the loosest monetary policy in its 100-year history.
US stocks rebounded on the news helped by gains in global oil prices, which helped to boost investor confidence. Brent crude is up 1.2 per cent to $US60.73 a barrel.
While a faster-than-expected drop in unemployment is pushing the US central bank toward raising rates next year, the recent declines in oil and commodity prices are holding inflation below its target, Bloomberg reported.
The rouble also strengthened, after the Russian Central Bank announced a number of measures to stabilise the banking system following Wednesday's dramatic freefall which prompted brokers to halt US dollar-rouble trades.
Ahead of the Federal Open Market Committee meeting in the US overnight, the greenback was already gaining ground, with some investors likely positioning themselves for an upbeat tone from the Fed.
National Australia Bank currency strategist Raiko Shareef said the Australian dollar snapped through strong technical support at 82 US cents on Wednesday afternoon on no news or data. That led to a 50 point collapse from which the exchange rate has struggled to recover.