Analysts say a global response from this weekend's Group of 20 (G20) meeting is crucial to addressing the financial crisis.

The Australian sharemarket has fallen below 4,000 points for the first time since 2005, with investors gripped by recession fears.

Members of the industrialised and emerging nations forum are gathering in Washington to discuss the turmoil.

Citibank managing director of economics, Stephen Halmarick, says the moves made so far by international authorities will not be sufficient to avert a global recession.

"Investors will be looking to the weekend G20 meeting, which our Treasurer's attending, to reinforce that it's going to be a global response to this global crisis and looking for some stabilisation there," he said.

At about 3:00pm AEDT, the All Ordinaries index had fallen as much as 7.9 per cent to 3,953, while the ASX 200 was down 317 points to 4,004.

The Australian dollar was trading at 66.44 US cents, after reaching as high of 71 US cents overnight.

New York's Dow Jones Industrial Average and S&P 500 both lost more than 7 per cent overnight.

Earlier, Mr Halmarick said the local currency has been oversold.

"The Australian economy is going to actually outperform the economies of Europe, New Zealand and Japan, so against those other currencies the Aussie dollar probably is undervalued at these levels, but at times of these extreme volatility the Aussie dollar's going to continue to trade in very wide ranges," he said.

"The extent of the volatility is just completely unprecedented.

"We've had a 13 cent range in the Aussie dollar this week, normally you wouldn't see that range over the course of the year."

Tokyo's stock market was also taking a heavy battering.

The Nikkei index was down about 11 per cent in morning trade.

In Seoul, share prices dropped just over 5 per cent within 15 minutes of opening.