The Australian dollar fell in overnight trade as markets continued to digest the Reserve Bank of Australia's (RBA) decision to cut interest rates.

At 7:00 a.m. local time (AEST) on Thursday, the Australian dollar was trading at 74.57 U.S. cents, down from 75.12 U.S cents on Wednesday.

By 9:30 a.m. local time (AEST), the Australian dollar had risen slightly to 74.65 U.S. cents.

The Australian dollar dropped to 74.47 U.S. cents in overnight trade - its lowest in three months.

Commonwealth Bank of Australia chief currency strategist Richard Grace said in a note on Thursday the Australian dollar had further declined and weakened against the major cross rates as commodity as well as equity prices declined.

He noted the markets were still digesting the RBA's decision to lower interest rates to 1.75 percent on Tuesday.

"A weaker Chinese yuan and generally weaker Asian currencies assisted the Australian dollar's under-performance against the majors," Grace said.

Westpac senior market strategist Imre Speizer said retail sales data was the main event risk for the Australian dollar on Thursday.