The dollar dropped to 77.29 US cents at 7.15am on Wednesday morning, down 1.1 per cent. It is the lowest rate it has traded at since late April.

The fall in value was due to a surge by the US dollar on the first full trading day of the week for US and European markets.

The greenback jumped after the release of stronger-than-expected economic data and comes on the back of US Federal Reserve chair Janet Yellen's speech last week when she confirmed they would raise interest rates if the US economic recovery continued.

"The market took her words to mean that the Fed is committed to a path towards normalisation and that a hike in the Fed Funds rate is now just a matter of when rather than a question of if," BK Asset Management's managing director of foreign exchange strategy Boris Schlossberg wrote in a note.

The data included a 6.8 per cent jump in new home sales, ahead of expectations. Also, durable goods orders declined slightly but core capital goods orders rose 1 per cent, ahead of expectations of 0.3 per cent. Consumer confidence also picked up to 95.43, up from 94.3 in April.

The greenback strengthened across the board, gaining further ground against the Japanese yen, which reached a year low of 122.03 overnight.

"It appears that after several weeks of counter trend rallies, the buck is back," Mr Schlossberg said.

National Australia Bank senior currency specialist Emma Lawson said the positive data opens the door for a US interest rate hike in 2015.

"Finally! They weren't extraordinary but good enough for a return to considering higher US interest rates this year. Durable goods orders, house prices, consumer confidence were all better than expected and there were some decent upward revisions to prior data."

Also overnight, the iron ore price jumped another 2 per cent after a similar gain on Tuesday morning. Iron ore at the Qingdao port of China is trading at $US62.28 a tonne, up 2.62 per cent since Tuesday and up 9.4 per cent since April.

The improving price came as China heads towards its annual steel production peak in May and June.

Analysts will be tracking the weaker steel demand after last week Chinese steel prices slid to their lowest levels in 12 years and construction slows.