Investing.com - The Aussie gave up early gains Tuesday after minutes from the September monetary policy board meeting showed concern over the impact on domestic growth of the economic slowdown in China.
"Members noted that the Chinese authorities had for some time been selling foreign exchange reserves to prevent the RMB from depreciating against the US dollar in the face of significant capital outflows," the RBA minutes said.
"This contrasted with the experience in the previous decade, during which foreign reserves had been accumulated to limit the appreciation of the RMB in the face of capital inflows. Members noted that it was not clear which assets the Chinese authorities had sold as part of the recent intervention nor which assets were being bought by those taking capital out of China, but given the potential size of these flows, their effects on asset markets could be large."
AUD/USD traded at 0.7133, down 0.06%, after the minutes, while USD/JPY changed hands at 120.47, up 0.19%.
The Bank of Japan holds its monetary policy meeting with a statement due around 1230 Tokyo time (0330 GMT). There is growing concern among some board members Japan's economy may deviate downwardly from the bank's baseline recovery scenario, but the nine-member board is still likely to stand pat on monetary policy. Following that, BoJ Governor Haruhiko Kuroda holds a news conference at 1530 (0630 GMT) to explain the board's decision.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.07% at 95.45.
Overnight, the dollar held gains against against the other major currencies in thin trade on Monday, as investors remained focused on the Federal Reserve's upcoming policy statement on Thursday.
Sentiment on the greenback remained vulnerable amid concerns that mixed U.S. economic reports and recent volatility in global financial markets will prompt the U.S. central bank to refrain from hiking interest rates on Thursday.
Data on Friday showed that the preliminary reading of the University of Michigan’s consumer sentiment index fell to 85.7 from 91.9 in July, compared to forecasts of 91.2.
Separately, the Labor Department reported that the producer price index was flat last month after a 0.2% increase in July.
Fed Chair Janet Yellen has said that an interest rate increase is data dependent but has also indicated that she expects to begin raising rates before the end of the year.
Earlier Monday, data showed that the euro zone's industrial production rose 0.6% in July, beating expectations for an uptick of 0.3%. Industrial production fell by 0.3% in June, whose figure was revised from a previously anticipated 0.4% slide.
On a yearly basis, the bloc's industrial production increased by 1.9% un July, compared to expectations for a 0.6% rise.