The Australian dollar has fallen overnight, buying 70.64 US cents on Tuesday morning from 70.97 US cents on Monday.

Yesterday, the local currency has inched up from six-week lows, helped by a rally in prices for iron ore, the country’s top export earner.

The Australian dollar added 0.2 per cent to 71.00 US cents on Monday, bouncing from Friday’s 70.605 – a level not seen since January 4.

The currency stumbled 2.2 per cent last week for its worst weekly showing since early October, as traders narrowed the odds on future rate cuts after the country’s central bank changed its tune on policy.

“One factor that may have contributed to the small AUD recovery can be attributed to the soaring iron ore price,” said Rodrigo Catril, senior forex strategist at National Australia Bank.

“Against a backdrop of soft commodity prices, iron ore prices have continued to climb reaching US$94 during the Asian trading session – the highest level in 4-1/2 years,” he added.

“China is back from holidays today and it will be interesting to see whether China’s iron ore prices reflect a similar jump.”

China’s Dalian iron ore hit limit up at market open on Monday while coking coal jumped 3 per cent.

China is Australia’s top trading partner and the biggest buyer of its iron ore.

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