At 7am (AEDT), the Australian dollar was trading at $US0.6603/06, down almost two US cents, or 2.9 per cent, from Wednesday's close of $US0.6799/03.
During the offshore session, the local currency moved between a low of $US0.6586 and a high of $US0.6812.
The Australian dollar failed to sustain yesterday's local session rally during offshore trading, with a slew of negative news dampening demand for the relatively high-yielding currency.
BNP Paribas senior currency strategist Sebastien Galy said lower commodity prices and declining US retail sales had led to US dollar buying and hurt the Australian dollar.
"The combination of the two has meant that the Aussie dollar has been under pressure," Mr Galy said from New York.
Crude oil for February delivery fell $US0.50 to settle at $US37.28 a barrel on the New York Mercantile Exchange.
Gold, silver and copper also were lower.
US retail sales fell 2.7 per cent in December, which was worse than market expectations of a 1.7 per cent decline.
Excluding automobile purchases, US retail sales fell 3.1 per cent, the largest monthly fall in that category since the start of the data series in 1992.
A disappointing day on US equity markets, which were dragged lower by retail and financial stocks, added to demand for the low-yielding US dollar.
"You are putting your assets into low yielders not particularly because you like the fact that they are low yielders but because they are considered safe-haven assets," Mr Galy said.
The US federal funds rate sits in a target range between zero and 0.25 per cent, while the RBA's cash rate is at 4.25 per cent.
Mr Galy said the focus for currency markets would be the December labour force report, due from the Australian Bureau of Statistics at 11.30am (AEDT).
"If we do a weaker than expected (report), that would put a significant amount of pressure on the RBA to cut and that will put more pressure on the currency," Mr Galy said.
"We are quite negative on the Aussie in general."
Economists have forecast total employment to decline by 20,000, a jobless rate of 4.5 per cent and a participation rate of 65.0 per cent.
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