The Australian dollar's post-US Federal Reserve meeting surge was short-lived with the greenback strengthening and wiping out all of the previous day's gains for the local currency.

The Australian dollar dropped as much as 2.5 per cent from its peak on Thursday, from a high of US78.32¢ to as low as US76.12¢.

The Aussie is now trading around US76.20¢.

It follows a day in which the Australian dollar surged almost 2¢ against the greenback following a meeting of the US Federal Reserve which offered a more cautious outlook for the American economy and changed the trajectory of rates normalisation in the country.

"Falling Australian interest rates and commodity prices, and a strong US dollar, should continue to weigh on the Australian dollar during the next few months. The next major downside target is US75¢," Westpac senior market strategist Imre Speizer said.

The market is now pricing in a 35 per cent chance of a rate cut in April.

Many economists are forecasting two rate cuts from the Reserve Bank of Australia this year, taking the official cash rate to 1.75 basis points.

The pullback in the Australian dollar suggests there was on overreaction to the US Fed's statement. Most major currencies experience a similar surge then slide back against the US dollar.

The euro and the British pound both saw their gains quickly reversed.

As a result, Wall Street markets also eased after a strong run the previous session. The Dow Jones is down 0.7 per cent, the S&P 500 is down 0.4 per cent, while the Nasdaq has inched 0.2 per cent higher.

The Australian market looks set for a soft start with SPI futures down 12 points.

Iron ore continued its slide down, falling another 0.9 per cent to $US55 per tonne. The steel-making ingredient has dropped 4.6 per cent this week.

Earlier this week, the Australian government's department of industry downgraded its 2015 iron ore forecasts a further 5 per cent to $US60 per tonne, just three months after cutting it from $US94 per tonne to $US63 per tonne.

Elsewhere in commodities, oil slumped heavily. Brent crude fell 2.6 per cent to $US54.45 per barrel, while West Texas Intermediate lost 2 per cent to $43.78.