The Australian dollar collapsed to multi-year lows against the US currency and Japanese yen in late trade today as a deepening financial crisis saw investors evacuate riskier assets.

With the outlook for the global economy deteriorating fast due to the ongoing credit market turmoil, investors are pricing in chances for more rate cuts by the Reserve Bank of Australia (RBA) before year end, adding to the Aussie's woes.

Markets have fully priced a 50 basis points reduction by the RBA at its next policy meeting in November, just a day after it stunned markets by reducing its cash rate by a hefty 100 basis points to 6.0 percent.

"Extreme risk aversion looks to be the main driver of the Aussie's collapse,'' said Tony Morriss, senior currency strategist at ANZ. "Falling commodity prices and a weaker global growth outlook mean the Aussie could move lower next year.''

The Aussie caved in to a low of $US0.6749 in late trade before the currency recovered slightly to $US0.6833 shortly past 5pm, from $US0.7216 late here on Tuesday, to be down over 15% this week.

Worries about the global slowdown saw investors exit positions in riskier assets and leveraged carry trades, benefiting the safe-haven yen. The Aussie fell to fresh five-and-a-half year low of 67.31 yen from 74.22 yen late here on Tuesday.