Investing.com - The Australian dollar dropped against its U.S. counterpart on Tuesday, approaching six-year lows after the Reserve Bank of Australia unexpectedly lowered interest rates, citing an overvalued local currency.
AUD/USD hit 0.7651 during late Asian trade, the pair's lowest since May 2009; the pair subsequently consolidated at 0.7638, tumbling 2.11%.
The pair was likely to find support at 0.7239 and resistance at 0.7832, the session high.
The RBA surprised markets on Tuesday when it unexpectedly lowered its benchmark interest rate to a new record-low 2.25% from 2.50% at the conclusion of its monthly policy meeting.
Commenting on the decision, RBA Governor Glenn Stevens said the Australian dollar remains overvalued. Stevens added that growth will be weaker for a longer period of time and that the unemployment rate should rise higher than expected.
Also Tuesday, the Australian Bureau of Statistics said that the country's trade deficit narrowed to A$0.44 billion in December from A$1.02 billion in November, whose figure was revised from a previously estimated deficit of A$0.92 billion.
Analysts had expected the trade deficit to A$0.77 billion in December.
In a separate report, the Australian Bureau of Statistics said that building approvals dropped 3.3% in December, compared to expectations for a 5.0% decline. The change in building approvals for November was revised to a 7.7% increase from a previously estimated 7.5% gain.
Meanwhile, sentiment on the greenback remained vulnerable after data on Monday showed that U.S. consumer spending fell at the fastest rate since September 2009 in December, dropping 0.3% as households saved on cheaper gasoline prices.
Separate reports showed that U.S. construction spending rose less than expected in December, while manufacturing growth slowed.
The Aussie was also sharply lower against the euro, with EUR/AUD rallying 2.14% to 1.4845.
Later in the day, the U.S. was to release data on factory orders.