The Australian dollar fell to its lowest level in more than three months after the central bank indicated the door is open for more interest rate cuts.
At 1700 AEDT on Friday, the local unit was trading at 102.98 US cents, down from 103.30 cents on Thursday.
During local trade, it dropped as low as 102.56 US cents, its weakest level since October 24.
In its quarterly Statement on Monetary Policy, the Reserve Bank of Australia (RBA) said the mining investment boom would peak this year and that consumer confidence was still relatively weak.
The RBA downgraded its economic growth forecasts for 2013 and said inflation was expected at between two and three per cent, matching its annual target range.
"The current inflation outlook would afford scope to ease policy further, should that be necessary to support demand," the RBA said.
Forex.com research analyst Chris Tedder said retail spending and other non-mining related economic data in Australia has been disappointing.
"The disparity between resource-based industries and the rest of the economy may be causing the (RBA) board some sleepless nights," he said.
"Although, the RBA noted there has been some positive developments in residential housing due to its recent attempts to stimulate demand."
At 1700 AEDT on Friday, the Australian dollar was at 96.02 Japanese yen, down from Thursday's close of 96.69 yen, and at 76.84 euro cents, up from 76.36 euro cents.
Mr Tedder said the RBA's willingness to cut rates, if needed, would continue to weigh on the Australian dollar's strength against the US dollar.
"Evidence of this can be seen in the pair's inability to push back above 103 US cents after the impressive Chinese trade data."
Official figures showed that China's trade surplus rose 7.7 per cent year-on-year to $US29.2 billion ($A28.55 billion).
Mr Tedder said this was a sign that the world's second largest economy was recovering.
Meanwhile, Australian bond futures prices were weaker after the release of Chinese trade data negated an earlier rally.
At 1630 AEDT, the March 10-year bond futures contract was trading at 96.550 (implying a yield of 3.450 per cent), down from 96.555 (3.445 per cent) on Thursday.
The March three-year bond futures contract was at 97.180 (2.820 per cent), down from 97.190 (2.810 per cent).
RBC Capital fixed income and currency strategist Michael Turner said bond futures rallied slightly on the release of the RBA quarterly statement but drifted off into the afternoon.
"The catalyst was the Chinese trade data, not that there's a particularly strong link given how volatile those data are for January."
Mr Turner said the market would be watching for any continued fallout from the European Central Bank's policy meeting.