The high-flying Australian dollar has struck a bit of turbulence

Flying High. Paramount Pictures. Source: IMDB

The Australian dollar had a rough session on Tuesday, sliding on the back of profit-taking and a sharp plunge in iron ore future in China.

To put its performance into perspective, it even fell against the greenback, the whipping boy of currency markets since the beginning of the year.

Yes, the Aussie was that weak.

Here’s the scoreboard as at 7.55am AEDT.

AUD/USD 0.7996 , -0.0021 , -0.26%
AUD/JPY 88.21 , -0.71 , -0.80%
AUD/CNH 5.1172 , -0.0156 , -0.30%
AUD/EUR 0.6503 , -0.0034 , -0.52%
AUD/GBP 0.5713 , -0.0018 , -0.31%
AUD/NZD 1.0864 , -0.0073 , -0.67%
AUD/CAD 0.9936 , -0.0039 , -0.39%

After gyrating in early Asian trade, the AUD/USD broker to the downside midway through the session, coinciding with a sharp plunge in Chinese iron ore futures which fell by close to 5%.

“[It] provided a reason to sell the Aussie,” said David de Garis, Economist at the National Australia Bank.

Base metals prices also fell, providing another headwind for the commodity-linked Aussie.

Along with an inability to break convincingly above the 80 cent level in recent days, this likely prompted profit-taking from traders.

However, after falling to as low as .7957, the Aussie has almost predictably recovered most of its early losses, gaining on the back of higher crude prices, strength in stocks, a stablisation in iron ore futures overnight along with renewed US dollar selling.

The weakness in greenback followed strong second-tier economic data out of Europe, something that helped to lift the euro and British pound.

“[The] USD remained on the defensive despite some sharp intra-day moves,” said Elliot Clarke and Tim Riddell, Strategists at Westpac Bank. “EUR and GBP flirted around their respective big-figures [of 1.2300 and 1.4000], supported by sound data but failed to add to their recent trends.”

Largely reflecting that renewed US dollar weakness, the AUD/USD currently trades at .7966.

AUD/USD Hourly Chart

Turning to the session ahead, there is almost nothing of significance on the economic calendar with only a smattering of second-tier releases scheduled.

In Australia, the Westpac-MI Leading Index will be released at 10.30am AEDT. That will be followed by Japanese trade and flash manufacturing PMI data at 10.50am and 11.30am AEDT respectively.

They will come and go without causing a ripple across the markets.

That’s it for Asia in terms of what’s coming up. If there ever was a day to knockoff work early and enjoy some downtime, this could be it.

Later in the session, there’ll be some focus on the release of flash manufacturing PMI readings from the eurozone and US.

UK unemployment data, along with US home prices, existing home sales and weekly crude oil inventories from the EIA will also be released.

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