The Australian dollar has fallen to a one-week low after a US Federal Reserve official confirmed that an interest rate rise is still on the cards.

At 0700 AEST on Tuesday, the local unit was trading at 71.32 US cents, down from 71.76 cents on Monday.

Early on Tuesday morning, it dropped to 71.29 US cents, its weakest level since September 16.

The Fed last week held off on raising its interest rate but Federal Reserve Bank of Atlanta president Dennis Lockhart overnight confirmed the decision was close and expects a hike before the end of the year.

Kathy Lien, MD, BK Asset Management, said the comments drove the US dollar higher, which put downward pressure on the Australian currency.

“He indicated that the labour market has shown substantial improvement, pointed out that the Fed’s job is to focus on the domestic economy and it is ready for policy normalisation,” Lien said.

“He added that a 25-basis-point rise won’t have significant impact and, therefore, October is a live meeting.”

Lien said the Australian dollar was also under pressure from weaker copper prices.

AAP