Geopolitical concerns have weighed on the Australian dollar following US led strikes in Syria.

At 0700 AEST on Wednesday, the local currency was trading at 88.41 US cents, down from 89.00 cents on Tuesday.

The US and its Arab allies unleashed deadly bomb and missile strikes on jihadists in Syria overnight.

The geopolitical concerns weighed on the Australian dollar, unwinding Tuesday’s gains made on the back of better than expected Chinese manufacturing figures.

“Support for the Australian dollar on yesterday’s better than expected HSBC flash China PMI is now a rather distant memory,” National Australia Bank global co-head of FX strategy, Ray Attrill, said.

“Assisting the move lower in high yielding currencies has been a tick higher in market volatility.

“Markets noted the step up in American led military action against ISIS in the Middle East.”

All eyes on Wednesday will be on the release of the Reserve Bank of Australia’s Financial Stability Review and whether the central bank expresses further concern about a potential housing bubble.

AAP