The Australian dollar was among higher-yielding currencies to come under selling pressure amid worries about the global economic outlook and the European debt crisis, forcing the Australian dollar down one per cent versus the US dollar.
The Australian dollar hit its lowest since August 26, coming in at $US1.0529.
ICAP senior economist Adam Carr said risk sentiment had taken a battering after the US Labor Department reported on Friday that the number of jobs didn't increase in August and that the unemployment rate was unchanged.
"The jobs data was weak and that's obviously fuelled fears of a recession," Mr Carr said.
"The labour market in the US has weakened - there's no question about that.
"But the factors driving that softness appear to be political, which has created a lot of uncertainty."
Mr Carr said the Australian dollar received a modest lift from positive data from the Australian Bureau of Statistics (ABS) on Monday, which showed company gross operating profits had risen 6.7 per cent in the June quarter.
"It shows that the economy is, generally, tracking very well.
"Profits are surging, sales of goods and services rose (and) the inventory rebuild is occurring."
The local unit was trading at 105.76 US cents at 1129 (AEST) and rose to 105.98 US cents shortly after the data was published.
Earlier in the morning, TD Securities and the Melbourne Institute reported that their inflation gauge had fallen 0.1 per cent in August, after prices rose 0.3 per cent in July.
Meanwhile, ANZ's job advertisement index fell 0.6 per cent in August for its second consecutive monthly decline.
"The inflation gauge and the ANZ job ads (data) are both suggesting maybe that employment growth will remain slow and inflation will ease off a little bit," Mr Carr said.
He expected the Australian dollar to trade within a narrow range for the remainder of the day, with no major local economic data due.
Meanwhile, the Australian bond market pushed further up towards a recent two-year high, due to risk-aversion.
The September 10-year bond futures contract was trading at 95.725 (implying a yield of 4.275 per cent), up from 95.590 (4.410 per cent) on Friday. On August 19, 10-year futures reached 95.775, the highest since March 2009.
The September three-year bond futures contract was at 96.300 (3.700 per cent), up from 96.140 (3.860 per cent).
