The Aussie dollar touched a two-month low at $0.7020 at one stage before finding enough support to steady at $0.7038. It remains well below the week's top of $0.7118.
It was aided by figures showing Australia boasted its second biggest trade surplus on record in January at A$4.5 billion ($3.17 billion). That blew away forecasts of A$3.0 billion and came on top of a healthy 5 percent jump in exports, particularly of gold.
That managed to soften to blow from a paltry 0.1 percent rise in retail sales for January, which missed forecasts of a 0.3 percent gain.
The poor reading suggested household consumption was struggling to gain traction after a dismal December quarter saw the economy as a whole grow by just 0.2 percent.
"We judge that the quality of growth was poor, while price pressures remained subdued," said Nomura economist Andrew Ticehurst. "The data add to our conviction for two 25bp rate cuts from the RBA by September."
"It also suggests some downward pressure for the Aussie, which we have been expecting to trade in a $68-71 cent range over coming months."
The futures market has surged in the wake of this week's gloomy numbers as investors wagered the Reserve Bank of Australia (RBA) would have to cut interest rates earlier, and more than once.
A quarter-point cut in the 1.5 percent cash rate is now fully priced in for October this year, compared to February 2020 at the start of the week. A further move to 1.0 percent is priced as a 50-50 chance.
Yields on three-year government debt, the most liquid of the short-term bonds, have dived 10 basis points to 1.588 percent, near their lowest since late 2016 and only just above the cash rate.
They are also 90 basis points below yields on comparable U.S. Treasury debt, close to the biggest gap on record and a constant drag on the Aussie.
Yields in New Zealand have also been on the way down as investors narrow the odds on rate cuts there, too.
Overnight indexed swaps, which track expectations for official rates, have dropped to 1.65 percent for a year ahead, well under the current 1.75 percent cash rate.
The kiwi dollar likewise slipped in the wake of the Aussie to hit a three-week low of $0.6753, before steadying at $0.6781.
"The kiwi remains on the back foot against the USD. It fell in sympathy with the AUD yesterday and failed to recoup losses," said Miles Workman, an economist at ANZ Bank in a research note. "Kiwi will likely remain under pressure for now."
New Zealand government bonds gained, sending yields 4.5 basis points lower at the long end of the curve.