The Australian dollar appears caught between the fortunes of the world's two biggest economies, with forces in Beijing and Washington conspiring to put pressure on the currency as the Chinese market swoons and bets on the timing of the US interest rate rise.
In late trade on Tuesday the Aussie was fetching US73.33Â¢ after sinking as low as US73.14Â¢. The fall followed China's sharemarket down, which tumbled for a second day and shed as much as 4 per cent during the morning trading session after Tuesday's 6 per cent fall. 
The Australian dollar's sell-off was triggered by commodity price fears, with a strong correlation emerging between China's sharemarket and weak metals prices, Saxo Capital Markets private trader James Kim said.
"Overnight the moves [in the currency] were influenced by the sell-off in base metals, most notably copper, and the sentiment flowing on from the fall in Chinese stocks," he said.
Copper prices, considered to be a bellwether of global demand for commodities, and aluminium prices both breached new six-year lows overnight.
That was beginning to weigh on commodities currencies such as include the Australian dollar.
The Aussie steadily lost ground overnight from its Tuesday high of US73.86Â¢ as the US dollar strengthened, boosted by strong US housing figures which heaped more positive data onto the evidence pile in the case for an interest rate hike in   September.
Static local data did nothing to distract the dollar out of its tight trading range with the market more concerned about China, FXCM chief currency strategist John Kicklighter said.
"Westpac's leading index for   July was unchanged and skilled vacancies for the same period rose a meagre 0.1 per cent," he said. The two days of losses on the Shanghai Composite Index have brought the focus back to China's volatile sharemarket and away from its currency, which was devalued last week but has since steadied.
National Australia Bank global co-head of FX strategy Ray Attrill said in the short term, Australia's currency would remain influenced by both China and the United States, and said the Chinese yuan could weaken up to 5 per cent further.
"If the Chinese currency is allowed to weaken further, it will influence other Asian currencies which go with the flow, it is sort of tit-for-tat copycat behaviour, and the Australian dollar will suffer in that environment," he said.
"The Australian dollar is very highly correlated with Asian emerging market currencies."
Meanwhile, if the Fed chose not to lift rates in   September, that could cue broad-based selling in the greenback, sparking some buying in the Aussie.
"Where the interest rate markets are, there's now less than a 50 per cent chance the rates will rise in   September," Mr Attrill said.
"But if you look at the currency markets, how strong the dollar is, it is more confident about the Fed moving on rates."
That means much of the interest rate rise may have been factored into the US dollar, he said.
Mr Kim said the currency markets should be bracing for big moves when the Fed lifts rates. Following a rally ahead of previous rate rises, the US dollar has come off, he said. That could mean a push upwards on the Aussie.
"People are saying that the days of the US75Â¢ and US76Â¢ handle are over, but it's not going to be a surprise to us if it does get there," he said.