China Cuts Reserve Requirement

Aussie surges on Chinese decision

While the rest of the world was focusing on the major central banks’ decision to increase dollar liquidity through swaps, China was quietly cutting its reserve requirement ratio. Effective Monday, the reserve requirement ratio is cut by 50 basis points.

The news has been somewhat lost in the clamor over the coordinated effort by central banks, but it has had an effect. Australia, which relies quite a bit on China, has seen its assets appreciate noticeably.

The Aussie is higher in forex trading, surging as China becomes more liquid, and as risk appetite in general rises. The combined moves are designed to boost markets, and the weakness that will result for the dollar is helping commodities like gold, and boost currencies like the Aussie. 

See Also

• Aussie in Forex Trading
  Currency market news