The Australian dollar is slipping south as China’s stock market debacle continues to drive gloom on global equity markets.

At 0700 AEST on Tuesday, the currency was trading at 71.11 US cents, down from 71.42 cents on Monday.

Martin Rudings, private client manager, OM Financial, said the Aussie continued to be on the back foot following last week’s extreme China-driven share market turmoil.

“The Aussie dollar is a proxy China trade. It’s probably the country that’s got the most to lose from a China slowdown,” he said.

However, Rudings said the currency stood to benefit from strength in commodities, with oil prices surging nine per cent and iron ore up slightly again overnight after rallying 3.4 per cent on Friday night.

The Reserve Bank is also widely expected to leave interest rates on hold at two per cent on Tuesday, which should prop up the dollar.

“That’s going to take away some of the downside to the Aussie dollar against the US,” Rudings said.

“Recently, it’s also been supported by traders selling Kiwi dollars and buying Aussie dollars, especially during the Asian market.”

AAP