The Australian dollar opened more than half a US cent weaker on Wednesday, pushed down by renewed demand for the US currency and a further slip in commodity prices.

At 7am (AEDT), the local currency was trading at US73.35¢, a sharp fall from Tuesday's close of US73.93¢.

During overnight trade, it hit a high of US74.09¢ and a low of US73.17¢.

Westpac currency strategist Richard Franulovich said there had been some talk of continued US Homeland Investment Act (HIA) driven flows shoring up the US dollar. "There is a bit of chatter of there having being some HIA related demand for the dollar," he said.

The HIA allows US corporates with overseas subsidiaries until the end of 2005 to repatriate offshore cash balances at a reduced tax rate.

"It's just a broad US dollar move," he said. "The euro was crushed today, it fell through $US1.19 down towards a low of 1.18 and the dollar is stronger pretty much across the board. And that explains most of the Aussie's pullback and it's probably worth mentioning that gold was down around $US10 and that's probably weighed on the Aussie as well."

And the local unit could trade to fresh yearly lows before the end of the year, he said. "Interest rate differentials are at their least attractive levels for the Aussie as they have been for some time and commodities technically look pretty damaged," Mr Franulovich said.

Australian interest rates are currently at 5.50 per cent with speculation focusing on if or when the Reserve Bank of Australia will hike in 2006.

Meanwhile, US interest rates are currently at 4.25 per cent with the broad expectations the US Federal Reserve will hike at least one more time. "I think we're very much on course for a continuation for that slow decay in the Aussie," Mr Franulovich said.