The Australian dollar dropped against its U.S. counterpart on Tuesday, re-approaching a four-month trough as sentiment remained fragile amid ongoing concerns over volatility in China.
AUD/USD hit 0.6953 during late Asian trade, the session low; the pair subsequently consolidated at 0.6956, declining 0.58%.
The pair was likely to find support at 0.6923, Monday’s low and a four-month low, and resistance at 0.7075, the high of January 8.
Markets were jittery after China’s central bank moved once again to support the yuan, but losses in Chinese shares overnight fueled further concerns over the outlook for the world’s second-largest economy.
The yuan\’s central parity rate against the U.S. dollar was set at 6.5628 Tuesday, slightly weaker than Monday’s 6.5626 level set by the People\’s Bank of China.
On Monday, China’s central bank attempted to soothe markets by setting the daily fix for the yuan against the dollar dramatically higher in comparison with its level at last week\’s close. While the Chinese currency surged against the dollar in offshore trade, Chinese equities continued to plunge, extending severe losses from the opening week of the year.
China is Australia’s biggest export partner.
The Aussie was sharply higher against the euro, with EUR/AUD jumping 1.15% to 1.5703.