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The Australian dollar has slipped further after China's manufacturing activity tumbled to a seven-month low.

At 1700 AEDT on Thursday, the local unit was at 89.54 US cents, down from 90.19 cents on Wednesday.

The Aussie fell sharply after a closely-watched gauge of Australia's biggest trading partner showed China's manufacturing activity has contracted this month, Easy Forex currency dealer Tony Darvall said.

"The Chinese data gave people more selling impetus," he said.

"Combine this with (last week's) bad unemployment data (for Australia) then a more significant downside move may come."

The British banking giant HSBC's preliminary reading for its purchasing managers' index (PMI) for China, which tracks manufacturing activity in factories and workshops, fell to 48.3 this month.

It's a further fall from January's reading of 49.5, which showed contraction for the first time in six months.

A reading above 50 indicates growth, while anything below signals contraction.

This battered the Aussie which was already down on a stronger greenback which rallied after the US Federal Reserve's minutes.

Early on Thursday morning, the Federal Reserve released the minutes of its January policy meeting which showed the bank is determined to continue reducing its bond purchase program if the US economy keeps improving.