The Australian dollar was lower against the US dollar and the yen after Japan intervened in currency markets to stem the yen's rise.
Finance Minister Yoshihiko Noda said a strong yen could hurt the economy and slow Japan's efforts to recover from its March 11 disasters of earthquake and tsunami.
A strong yen is harmful to the Japanese economy because it reduces the value of foreign earnings for companies that export cars, electronics and other manufactured good.
At 1200 AEST on Thursday, the Australian dollar was trading at 106.95 US cents, down from 107.39 cents on Wednesday.
The local dollar rose to 83.77 Japanese yen by noon, from 82.91 yen on Wednesday, while the US dollar was worth 78.34 yen, up from 77.20 yen.
The Euro rose to 112.10 yen from 109.70 yen previously. Commonwealth Bank currency strategist Joseph Capurso said the Japanese yen had experienced big falls against the major currencies.
"The Aussie dollar is not moving around much, but the Japanese yen sure is. The intervention has weakened the yen, so it's moved a long way," he said. "That's really the main story of the day."
Markets now await the release of the Reserve Bank of Australia's (RBA) Statement on Monetary Policy, due on Friday morning.
The statement will be read closely for hints on the RBA's next move on the cash interest rate, after it kept the rate steady at its August board meeting on Tuesday, despite the announcement of a high June quarter inflation last week.
"They may use the phrase `Rates may need to rise at some point'," Mr Capurso said.
"If that were to happen, then the Aussie might recover a bit, but not very much." The main international data due in the next few days is US non-farm payrolls for July, which is a key indicator of unemployment.
Mr Capurso expected the Australian dollar to trade between 106.80 US cents and 108.00 cents on Thursday afternoon.
At 1200 AEST on Thursday, the September 10-year bond futures contract was trading at 95.310 (implying a yield of 4.690 per cent), down from 95.365 (4.635 per cent) on Wednesday.
The September three-year bond futures contract was at 95.900 (4.100 per cent), down from 95.970 (4.030 per cent).
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