The Australian dollar is back below 87 US cents after falling half a US cent on the back of weaker-than-expected retail spending figures.

At 1200 AEST on Wednesday, the local unit was trading at 86.93 US cents, down from 87.55 cents on Tuesday.

Retail spending rose just 0.1 per cent in August, weaker than the 0.4 per cent rise economists were expecting, figures from the Australian Bureau of Statistics show.

After the figures were released, the Australian dollar fell as low as 86.66 US cents, its weakest level since late January.

Westpac chief currency strategist Robert Rennie said the retail figures were disappointing and raised doubts about a recovery in spending this year.

“You don’t really see any good news there at all,” he said.

“So, it’s not surprising that the Aussie dollar has reacted very poorly to it.”

Mr Rennie said there was a real chance the Australian dollar would break its current support level of 86.60 US cents, which is also the 2014 low.

When the currency has got towards that point over the past few days traders have been reluctant to continue selling.

“We get a reasonable bout of economic data to keep an eye out for, with building approvals and international trade data tomorrow,” he said.

“Weak data today certainly suggests that 86.60 US cents will be challenged and risk of a push below that level has been increased.”

Meanwhile, the Australian bond market was firmer.

At 1200 AEST on Wednesday, the December 2014 10-year bond futures contract was trading at 96.495 (implying a yield of 3.505 per cent), up from 96.485 (3.515 per cent) on Tuesday.

The December 2014 three-year bond futures contract was at 97.280 (2.720 per cent), up from 97.260 (2.740 per cent).