The Australian dollar has hit a fresh five-and-a-half year low against the greenback this morning, mainly due to US dollar strength.

The local currency took an early plunge from the 81.3 US cents at the end of trading in the US last week to as low as 80.52 US cents when trade resumed after the weekend in Australia.

At 10:50am (AEDT) the Australian dollar had risen slightly off its early low to 80.7 US cents.

The fall in the local currency has more to do with a rise in the US dollar than further weakness in the Australian dollar.

An index measuring the strength of the US dollar against a basket of other currencies shows the greenback at its strongest level in more than nine years.

"The Australian dollar started the year on the back foot as the US dollar continued to rally despite some weakening in its data pulse," wrote ANZ's analysts in a note on the market movements.

Late last year, the Commonwealth Bank cut its Australian dollar forecasts against the greenback to reflect this recent strength.

Currency analysts at Australia's biggest bank now expect the Aussie to fall to 78 US cents by the end of March, down from a previous forecast of 86 US cents.

They expect the currency to bottom out at 73 US cents by the end of June as the Federal Reserve begins lifting interest rates in the world's biggest economy, before edging back to 77 US cents by year's end.

This shift not only reflects the growing prospect of near term US rate rises, but also a flip in the terms of trade, which are improving in the US at the same time as they are declining in Australia, both due to falling commodity prices.

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Westpac senior currency strategist Sean Callow said the euro has fallen particularly heavily against the greenback.

"The euro, reached its lowest levels against the US dollar since 2006, and it sort of spilled over to a range of currencies including the Aussie, which was already close to its lowest level in several years," he told The World Today.

He is not as pessimistic as the Commonwealth Bank analysts about how low the Australian dollar might fall.

"Earlier in the year the Aussie looks as though it will probably trade in the high 70s, maybe to about 78 or so, with the US dollar being strong and a rate cut [in Australia] being a very live prospect in the next few months," he said.

"But, later in the year, we think China's economy will hold up pretty well, still print about 7 per cent growth, maybe a little bit higher, commodities will improve, Australia's trade position should improve sharply, so we've got a profile that's got it around about the 79-81 [US cent] range over the next few months, but actually finishing the year at 85."

The Aussie was up against the euro at 67.7 cents, as well as being around half a per cent higher against the British pound at 52.95 pence.

After reaching record lows against the Kiwi last week, the Australian dollar had also risen back to 105.4 New Zealand cents.