×

Australian dollar hits 4.5-year low on China fears

Getty Images

The Australian dollar hit a 4-1/2-year trough against its U.S. counterpart on Tuesday as prices of iron for construction fell in China amid weak demand from the property sector and after Australia's premier warned of heightened "terrorist chatter".

Following the siege in a Sydney cafe a week ago, Australian Prime Minister Tony Abbott said the public must remain alert as the country headed into Christmas and New Year celebrations, helping to prod lower an Aussie dollar already weakened by the data from China.

Read MoreThe perfect ingredients for a Santa Claus rally

The Australian dollar fell to as low as $0.8087, its weakest since June 2010, before recovering a little to trade at $0.8118, down 0.2 percent on the day.

"It's been a weak year for the Australian dollar, reflecting the slowing growth outlook for China, which has resulted in a further deterioration of Australia's terms of trade," said Lee Hardman, an economist at Bank of Tokyo-Mitsubishi UFJ in London.

"We still think there's scope for further downside going forward."

The U.S. dollar touched a two-week peak against the yen at 120.19 overnight but struggled to make further headway on Tuesday.

A record-closing high on Wall Street had helped lift the greenback against the yen in New York, but momentum quickly faded in thin year-end conditions, leaving the dollar stuck in a very slim 120.01/120.19 range and well short of a 7-1/2 year peak of 121.86 set earlier in the month.

Read MoreSantelli: Dollar-yen 'lofty' action

The euro was equally muted, having hit a 28-month low at $1.22160 on Monday, staying flat on the day at $1.22365.

A pre-Christmas rush of U.S. data due later in the day could further highlight the diverging policy outlook between the United States and most of the developed world.

Among them, third-quarter gross domestic product is expected to be revised up, putting U.S. economic growth above a 4-percent annualized rate for a second straight quarter.

"We are likely to see some impressive U.S. data on Tuesday. This would be the first time since 2003 we have seen two consecutive quarters of GDP growth above 4.0 percent," analysts at BNP Paribas wrote in a note to clients.

Read MoreRussia tells companies to sell forex to help ruble