China’s Interest Rate Cut Lifts Australian Dollar

The Australian dollar climbed today, reaching the highest level in more than a year and half against the Japanese yen. The rally followed a surprise interest rate cut from China’s central bank.
The People’s Bank of China made an unexpected move today, announcing that it lowers the one-year deposit rate by 0.25 percentage point to 2.75 percent and reduces the one-year lending rate by 0.4 percentage point to 5.6 percent. The changes will take effect tomorrow. It was the first interest rate cut in over two years. While analysts were counting on such decision, they were surprised by its timing.
The monetary easing suggests that the central bank wants to reinvigorate economic growth. China is the biggest trading partner of Australia, meaning that faster growth in the Asian nation should lead to higher demand for Australian exports.
AUD/USD advanced from 0.8617 to close at 0.8668, reaching the high of 0.8722 intraday. EUR/AUD plunged from 1.4543 to 1.4295. AUD/JPY ticked up from 101.84 to 102.03, while its daily maximum of 102.84 was the highest since April 2013.

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