The biggest one-day fall on local shares in nine months also weighed on the currency.
At 1700 AEDT on Friday, the local unit was trading at 100.19 US cents, down from Thursday's local close of 100.53 US cents.
Since 0700 AEDT, the Australian dollar traded between a high of 100.42 US cents and a low of 100.07 US cents, according to IRESS data.
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Commonwealth Bank currency strategist Joseph Capurso said the local unit experienced a lacklustre day of trade, dipping slightly after the release of the Chinese inflation data that was above the government's target rate.
Chinese authorities said prices rose 4.9 per cent year on year in February, well above the official target, despite government efforts to rein in inflation.
The Chinese government has an annual inflation target of four per cent.
"The Aussie has traded in a tight range," Mr Capurso said.
"Since 7am, it's gone up a little bit then fell away in the afternoon."
The Chinese National Bureau of Statistics last month tweaked the key inflation gauge by reducing the weighting of food prices while increasing the weight for rents and other housing costs.
The country's producer price index, which measures the cost of products at the factory gate, rose 7.2 per cent year on year in February compared with a rise of 6.6 per cent in January, as global commodity prices soared.
Another factor weighing on the Australian dollar was the local share market, which posted its biggest weekly fall in nine months.
At 1613 AEDT on Friday, the benchmark S&P/ASX200 index was 1.17 per cent lower at 4644.8 points, while the broader All Ordinaries index was 1.18 per cent lower at 4734.8 points.
During the offshore session on Friday night (AEDT) the US Census Bureau is expected to publish its retail sales data for February.
The median market forecast is for the data to show a one per cent rise in sales.
Mr Capurso said a larger than expected rise could see investors flock to the US dollar over the weekend session and drive the local unit below parity with the US dollar.
The RBA's trade weighted index (TWI) was 74.7, down from Thursday's close of 74.8.
