The Australian dollar dropped on Tuesday, tracking the downward dive of the Chinese yuan as concerns spread about efforts by the People's Bank of China to reduce the renminbi's performance, according to Reuters.
China, host of the globe's second-largest economy, is the destination of large amounts of commodity production generated by Australia thus the Aussie is sensitive to financial and economic developments in the Asian nation.
"It's hard to know what the knock-on effect of the yuan drop will be, because the market is unsure as to what's the driver – is it the PBOC curbing speculation, increased political tensions between the U.S. and China, or something else?" head of FX strategy and trading Vincent Crimmins with the Bank of Ireland in Dublin told Reuters on Tuesday.
The Aussie fell about 0.2 percent against the U.S. dollar on Tuesday.
The Wall Street Journal reports the Aussie is likely to be impacted by data about domestic capital expenditures, congressional testimony of U.S. Federal Reserve chief Janet Yellen and Chinese data about manufacturing, all of which is slated to be released later this week.
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