The Australian dollar tumbled to a six-week low against the greenback on Tuesday, as concerns rose over worsening nuclear radiation levels in Japan, leading to increased risk aversion in the markets.

The AUD/USD fell to $0.9877 in early European trading hours, losing more than 200 pips since an overnight high of above 1.0100.

Selling pressure in Aussie intensified as traders became cautious over the earthquake in Japan hitting the country’s exports in the very near term. Japan is currently the second largest export market for Australia.

Japan's prime minister Naoto Kan said on Tuesday that radioactive levels had become high around a nuclear power plant damaged by the nation’s biggest earthquake, and there was a risk of radiation leaking into the atmosphere.

Japanese stock markets slumped for the second day on Tuesday on escalating fears of a nuclear crisis after a radiation leak was detected at the Fukushima Dai-Ichi nuclear plant.

Benchmark Nikkei index slumped 10.55 percent or 1,015.34 to 8,605.15 after plunging 6.18 percent in the previous session. Meanwhile, the Topix index plunged 9.47 percent to 766.73 and recorded its worst two-day slump since 1987.

Also, the New Zealand dollar fell more than 1 pct on Tuesday to $0.7281, its weakest since late September 2010. It declined around 1.4 pct against the yen to 59.37 yen, its weakest in more than 6 months.