The Australian dollar is lower due to a continuing impasse on talks in the United States to avert a so-called fiscal cliff.
At 1200 AEDT on Thursday, the local currency was trading at 104.73 US cents, down from 105.16 cents on Wednesday afternoon.
Westpac chief currency strategist Robert Rennie said that as the year's end approached, investors were watching the US to see if and when an agreement on measures to address the country's budget deficit could be reached.
"The Aussie dollar's position is partly to do with trepidation around the fiscal cliff," he said.
"Another 24 hours have gone by and we still don't have an agreement.
"We also have a much lower liquidity in the market, as the end of the year comes closer."
Multiple discussions between the Democratic and Republican parties have failed to resolve the budget issues, with a series of tax hikes and spending cuts due to begin in January.
Mr Rennie said improved sentiment in Europe had also taken some shine away from the Australian currency.
"Global investors have spent the last three or four years underweighting European assets, and overweighting Australian ones," he said.
"But if you look back over 2012, two of the most important global economic events were the LTROs (long-term refinancing operations) and OMTs (Outright Monetary Transactions) for the euro zone.
"I think (European Central Bank president) Mario Draghi should take pride in achieving those things, and removing left-field risk from Europe. For this reason, the movement we've seen in euro crosses, including the euro-Aussie dollar, are fairly significant."
At 1200 AEDT, the Aussie dollar was trading at 79.24 euro cents - its lowest point since October.
Also boosting sentiment in Europe was the release of a business confidence survey from Germany's Ifo Institute, which showed a larger than expected rise.
Meanwhile, Australian bond futures prices were higher at noon.
At 1200 AEDT on Thursday, the March 10-year bond futures contract was at 96.655 (implying a yield of 3.345 per cent), up from 96.640 (3.360 per cent) at Wednesday's close.
The March three-year bond futures contract was trading at 97.250 (2.750 per cent), up from 97.220 (2.780 per cent).