At 12.00pm (AEDT), the dollar was trading at $US0.6620/23, down more than half a US cent from yesterday's close of $US0.6675/80.
During the morning, the currency moved between an early low of $US0.6601 and a mid-morning high of $US0.6679.
The dollar hit its low point at 07.30am AEDT soon after the Reserve Bank of New Zealand announced a 150 basis point interest rate cut which took the cash rate to a record low 3.5 per cent.
The cut was bigger than market forecasts of 100 basis points.
OzForex manager of corporate business Jim Vrondas said the domestic currency had come under pressure early this morning as traders took the view the Reserve Bank of Australia (RBA) may cut interest rates by a bigger than expected margin when it meets on February 3.
"Given the Reserve Bank of New Zealand cut by a lot more than the market was expecting, there's the likelihood of our central bank surprising,'' he said.
Headline inflation fell 0.3 per cent in the December quarter, marking the biggest quarterly drop in eleven years.
Economists surveyed by AAP expect the RBA to slash interest rates by 75 basis points on Tuesday, which would take the cash rate to a 44-year low of 3.5 per cent.
The dollar usually climbs when Wall Street and the local share market rise, but the currency came under pressure this morning as US Federal Reserve hinted it would buy US Treasury bonds, which boosted the greenback.
Mr Vrondas said the dollar was likely to have a shortlived rally this afternoon, and would face selling pressure at $US0.6700.
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