Investing.com - The Australian dollar dropped to three-week lows against its U.S. counterpart on Wednesday, as volatility on Chinese markets continued to dampen demand for the currency and as investors eyed the release of U.S. data due later in the day.
AUD/USD hit 0.7904 during late Asian trade, the pair’s lowest since December 17; the pair subsequently consolidated at 0.7104, declining 0.81%.
The pair was likely to find support at 0.7091, the low of December 17 and resistance at 0.7218, Tuesday’s high.
The Australian dollar remained under pressure since data from China on Monday showing that manufacturing activity contracted for the tenth straight month in December rekindled fears over a China-led slowdown in global growth.
China is Australia’s biggest export partner.
China injected 130 billion yuan into the banking system on Tuesday to stabilize its equity and currency markets, which recorded the worst opening day's trade in years in the previous session, but investors remained cautious.
Earlier Wednesday, data showed that China’s Caixin services purchasing managers' index ticked down to 50.2 in December from 51.2 the previous month, disappointing expectations for a rise to 52.3.
Markets sentiment was also hit by the growing rift between Iran and Saudi Arabia, following the execution of a prominent Saudi Shia cleric.
Meanwhile, investors were eyeing the release of U.S. employment and trade balance reports, as well as the minutes of the Federal Reserve’s most recent policy meeting due later in the day, for potential hints on the U.S. central bank’s next steps.
The Aussie was also lower against the euro, with EUR/AUD sliding 0.44% to 1.5103.