The dollar slid on Thursday, pressured by data showing a jump in U.S. continuing jobless claims, but losses were viewed as temporary after two days of gains as the greenback's uptrend remained intact.
Many market participants believed Thursday's jobless numbers would not alter the course of the Federal Reserve's reduction of its asset-buying program.
The Australian dollar, meanwhile, tumbled against the U.S. dollar to its lowest since August 2010 after a surprise fall in Australian employment raised the possibility of another cut in interest rates from the Reserve Bank of Australia.
(Read more: Is the euro headed for an Aussie-style crash?)
In the United States, continuing claims rose 174,000 to 3.030 million in the week ending Jan. 4, which was the highest weekly figure since a one-week spike up reported last July. Initial claims for state unemployment benefits, however slipped 2,000 to a seasonally adjusted 326,000.
"The dollar's fall may reflect bigger-than-expected continuing claims and some could see that as an argument for the labor market being not too strong," said Shahab Jalinoos, currency strategist, at UBS in Stamford, Connecticut.
(Read more: Will Australia's jobs shocker put the RBA to work?)
"In the long run, however, these numbers would be not so relevant. The intraday ranges we're seeing right now are fairly muted and it comes after an overnight session where the dollar was actually quite strong."
Other data on Thursday showed consumer prices in December recorded their largest increase in six months as gasoline prices rebounded. There was, however, little to suggest a broader pick-up in prices given tame underlying inflation.
The dollar index, a measure of the greenback's value against six major currencies, fell 0.1 percent to 80.96.
The Aussie dollar fell as low as US$0.8777, the lowest since late August 2010 and was last down 1.2 percent at US$0.8804.
(Read more: Contrarian call:US dollar to weaken further in 2014)
Australian employers shed jobs at the fastest pace in nine months in December, with full-time positions hit particularly hard, contrary to economists' expectations of modest job gains.
Investors reacted by reviving talk of another cut in interest rates from the Reserve Bank of Australia, which has been signaling it would rather not ease again from the current record low of 2.5 percent.
(Read more: Could currency warsmake a comeback in 2014?)
Computer-driven hedge funds, meanwhile, have latched onto the currency's slide.
Richard Perry, analyst at Hantec Markets, said that while technical factors suggest there could be a small bounce in the Aussie, it could meet resistance between $0.8820 and $0.8863.
"I'd be using that technical rally as a chance to sell. It does not look good," he said.