July 19 (Bloomberg) -- Australia’s dollar strengthened after the People’s Bank of China said it would remove the floor on lending rates offered by financial institutions, boosting optimism Chinese growth will support the economy.
New Zealand’s currency jumped to a one-month high against its U.S. counterpart after the announcement, which gives Chinese lenders more freedom to set borrowing costs and builds on pledges by Premier Li Keqiang to expand an overhaul of interest rates. China will also remove the cap on lending rates offered by rural cooperatives, according to a statement on the PBOC’s website. The moves are effective tomorrow.
“It is more liberalization, more of what’s been promised and that can only be a good thing,” said Neil Mellor, a currency strategist at Bank of New York Mellon in London. “The Australian dollar particularly has been seen as a proxy trade for the yuan because of the close ties between the two countries.”
The Aussie dollar advanced 0.4 percent to 92.10 U.S. cents at 12:53 p.m. London time. It gained versus all of its 16 major peers except the kiwi and South African rand. New Zealand’s currency rose 0.7 percent to 79.58 U.S. cents after strengthening to 79.91, the most since June 19.
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