It's common for toddlers to have fine, downy hair on their arms, legs, back, or even face. This is most likely due to genetics. If you or your daughter's other parent had a lot of body hair as a toddler (or someone in either of your families did), your daughter simply inherited the body hair.
It's normal for children to have this type of hair, and it usually disappears as they get older. There's no need to worry about it, and it's definitely not a sign of any medical condition.
If you are concerned about your daughter's hair growth, you can always talk to her pediatrician. They can help you determine if there is anything to worry about.
