The Australian dollar jumped against the US dollar after the PBOC announced it cut its benchmark interest rate on Thursday in attempt to bolster slowing growth in the world’s second-largest economy. This is the second time the central bank of China cut rates. The last time was on June 7.
The latest rate cut will be effective from Friday. The benchmark lending rates will be lowered by 31 basis points to 6 percent, and deposit rates will be reduced by 25 basis points to 3 percent, the People’s Bank of China said in a statement on its website.
AUDUSD rose to 1.0323 immediately after the rate announcement at 11:00 GMT from 1.0278 and proceeded higher to a new two-month high of 1.0327.
China is a major export destination for Australia, where most commodities are sent. This is why the Australian dollar is sensitive to news from China, and any positive news especially on growth, will lift the aussie, which is a commodity-linked currency.
Meanwhile at the same time, the Bank of England announcement further quantitative easing to stimulate the UK economy. Also shortly after, the European Central Bank cut its benchmark rate by 25 basis points to 0.75 percent.