The Australian dollar fell almost a cent on Wednesday as China took fresh action to dampen bank lending there, while a slide in the eruo gave a boost to the US dollar. The Aussie sank to $0.9155, down from $0.9247 late in New York and under chart support at $0.9170. The next target was $0.9121 and then $0.9095. The selling gathered pace on reports from reports China had asked banks to stop lending for the rest of January.

Three industry sources told Reuters that China's central bank has ordered at least two banks to lift their required reserve ratios by 0.5 percentage points. Any signs of thightening in China usually hurts commodity-linked currencies like the Aussie. China is Australia's top trading partner and one of the biggest buyers of its exports. "The price action tells you a quite a lot about how the market is currently trading," said Robert Rennie, chief strategist for Asia, in Westpac. "There seems to be a good deal of nervousness about the downside risks in the short-term. I would not be surprised to see the Aussie continuing to work its way lower."

Copyright Reuters, 2010