The Australian dollar has bounced as investors take profits following the currency’s fall last week.

At 0700 AEDT on Tuesday, the Australian dollar was trading at 87.51 US cents, up from 87.05 cents on Friday.

The currency fell as low as 86.78 US cents over the long weekend – its lowest point since July 2010 – on the back of weak Chinese manufacturing data and comments from Reserve Bank of Australia board member Heather Ridout indicating a desire for the dollar to fall to 80 US cents.

But the currency bounced overnight as profit takers took advantage of last week’s negative risk sentiment, Bank of New Zealand strategist Kymberly Martin said.

“The market is still quite cautious,” Martin said.

“There’s still a lot of concern about emerging market currencies in particular but at least we’ve started to see a bit of stabilisation overnight.

“Given the strong falls the Aussie had at the end of last week, I think there’s probably some people coming in and taking some profit and also looking toward the National Australia Bank business confidence survey today and hoping to see some stabilisation.”

AAP