The Australian dollar fell to new decade-plus lows on Thursday after China’s central bank cut key interest rates to try and support the economy hit by the COVID-19 virus.
The dollar touched 66.30 US cents in Asian trading, the lowest the currency has been against the greenback since the GFC 11 years ago.
News of the cut trimmed a rally in the market which saw the ASX 200 jump more than 30 points before retreated to close up 17 points at a record 7,162.5.
The ASX 200 is up 7.2% for the year so far, despite all those fears about the impact of the bushfires and the COVID-19 virus.
The move to cut rates was seen as indicative of the pressures on the economy which is Australia’s biggest export market.
Weakness in the Chinese yuan helped push the Aussie lower after the People’s Bank of China cut benchmark interest rates.
The central bank cut its LPR benchmark interest rates for one and five-year loan terms by 10 basis points and 5 basis points respectively to 4.05% and 4.80%.
The cut followed a similar move in the central bank’s medium-term lending rate on Monday.
This is on top of the injection of billions of yuan in liquidity into money markets which has supported the share and bond markets.
The virus outbreak has disrupted global supply chains and caused widespread disruption to businesses and factory activity in China, prompting authorities to introduce a steady stream of policy measures over recent weeks to support the economy by cushioning the impact of the epidemic which is centred on Hubei province.
Thursday saw the Chinese government report a slowdown in the number of new cases of infection.
Reuters explained that the LPR LPR is a lending reference rate set monthly by 18 banks. The People’s Bank of China revamped the mechanism to price LPR in August 2019, loosely pegging it to the medium-term lending facility rate.
