The Australian dollar plunged more than half a US cent on Wednesday after thin trade and weak sentiment around commodity currencies allowed it to drop below US82¢ for the first time since June 2010.
In local trade, the Aussie was fetching about US81.55¢, after diving suddenly from around US82.16¢. It was also at a new four-and-a-half year low on a trade-weighted basis, which is the measure which most influences policy at the Reserve Bank of Australia.
For most of the day, the currency had held up well despite ongoing turbulence in global markets fuelled by the collapsing Russian rouble and contagion throughout emerging markets.
However, it suddenly lost support around US82¢ as an absence of bidders because of the Christmas wind-down added to positioning ahead of the US Federal Reserve's December policy meeting early on Thursday morning Australian time.
With the US economy continuing to pull away from most of the rest of the developed world, Fed-watchers are expecting further signals around when the central bank might start lifting interest rates.
Barring any negative surprises, Fed commentary is likely to consolidate the US dollar and US financial assets as safe haven investments amid an increasingly stormy global environment.
HIFX head of corporate sales Dan Bell said Wednesday's Aussie sell-off was linked to this sharpening divergence.
"This is a bit of positioning leading up to the Fed announcement [on Thursday] morning," he said.
"There wasn't a lot going on [on Wednesday] in terms of actual data flow, so I think we just saw the market square up and take out some weak stop-loss orders on the downside", he said, referring to technical levels which trigger automatic sales of the currency.
IG market strategist Stan Shamu agreed, but suggested the fall might have overshot due to thin trade.
"It's more of a price action driven move, with traders reacting to the slip below US82¢," he said.
"But it's a bit more of an exaggerated move than usual.
"The fact it's broken below the US82¢ mark has triggered some sort of stop in that region, but in terms of actual news, there isn't much going on."
Credit Suisse strategist Damien Boey said the dollar had little support at US82¢ because of consistent downward pressures.
"It was hanging in there as a resistance point for a while, but all the drivers of the currency have just fallen and fallen," he said.
"The issue with commodity prices is the driver of the weakness is still not well understood. While that's the case there is no bottom on the cycle," he said.
HIFX's Dan Bell said currencies tied to energy and commodities exports – including the Australian dollar – would remain under pressure into the New Year.
His comments come as the Russian government and central bank struggle to arrest the ongoing slide of the rouble, which has succumbed to capital flight.
The rouble's woes have proved contagious in recent days, with other emerging market commodity exporters under pressure.
"We're going to see ongoing pressure on commodity currencies over the next few months as these energy prices and oil prices continue to struggle," said Mr Bell.
"I think the market is starting to wake up to the reality of higher interest rates in the US next year.
"And I think there are some real concerns that a lot of emerging economies have US dollar bond debt exposure, which is going to impact them as the greenback strengthens."
UBS strategist Niall MacLeod wrote in a note on Wednesday that countries such as Indonesia and India looked vulnerable in this context, although cheaper energy prices would help offset the impact of this on India.
"Combined with emerging market currency weakness, we would also be wary of those markets facing foreign funding liquidity risks, especially ahead of rising US interest rates next year," he said.