Aussie opens lower after Chinese Central Bank reserve raised

from MoneyTrading.com.au

The Australian dollar opened lower after China unexpectedly raised the proportion of deposits that banks must set aside as reserves, leading to falls in gold and commodity prices. The Australian dollar was trading at 0.9204USD last. During the offshore session, the Australian dollar traded between 0.9189 USD and 0.9307 USD.

China raised the proportion of deposits that banks must set aside as reserves to cool the world's fastest-growing major economy as a credit boom threatens to stoke inflation and create asset bubbles. Reserve requirements will increase by 50 basis points from January 18, the central bank said. That move was expected at some point, but probably it occurred a bit earlier than what the market factored in, and as a result we saw concerns raised about a tightening in Chinese monetary policy and whether that will slow Chinese growth and slow demand for commodities.