The Australian dollar has fallen to its lowest level in two weeks on concerns about US debt, after a plan to raise taxes for millionaires divided Republicans in Congress.
At 1700 AEDT on Friday, the currency was trading at 104.53 US cents, down from 104.91 cents on Thursday afternoon.
Earlier, the Australian dollar fell to 104.38 US cents, its lowest level since December 4.
Republicans on Friday (Australian time) ditched a vote on a controversial "Plan B" proposed by House of Representatives Speaker John Boehner as part of debt negotiations with President Barack Obama.
The two men are attempting to reach an agreement on measures to bring down the country's debt, while avoiding a `fiscal cliff' due to occur in 2013 as Bush-era tax cuts expire and automatic spending cuts come into effect.
Mr Boehner's plan would have seen the tax cuts expire for millionaires but extended to everyone else, while President Obama wants the tax cuts to expire for everyone earning more than $US400,000 a year.
Easy Forex currency dealer Anthony Botros said news of the Republican revolt over Plan B hurt global sharemarkets and pushed down risk assets like the Australian dollar.
"We're seeing futures in US heading into the negative considerably and that is causing risk aversion, which is further weighing on the Aussie dollar," he said.
Mr Botros said markets were increasingly worried the two parties would not reach a deal before the first of the fiscal cliff measures came into effect in early January.
"It does look like market sentiment is quite negative at the moment," he said.
"Congress doesn't sit again until after Christmas so we are starting to cut it quite fine."
He said the Australian dollar's movements were likely to be volatile over the next week, due to uncertainty about the debt negotiations and lower liquidity during the Christmas/New Year period.
At 1700 AEDT, the Australian dollar was at 87.82 Japanese yen, down from 88.06 yen and at 79.18 euro cents, down from 79.41 euro cents.
Meanwhile, UBS interest rate strategist Matthew Johnson said Australian bond futures prices moved higher on news of the failure of Mr Boehner's plan.
"Bond futures, whether they were Australian or US or whatever, all rallied a bit," he said.
At 1630 AEDT on Friday, the March 10-year bond futures contract was at 96.695 (implying a yield of 3.005 per cent), up from 96.660 (3.34 per cent) at Thursday's close.
The March three-year bond futures contract was trading at 97.280 (2.720 per cent), down from 97.250 (2.750 per cent).