Week in FX Asia – AUD and NZD Rise After China Carries Out Bank Lending Reform

Effective Saturday Chinese Commercial Banks will have the freedom to set their own lending rate. Previously the lowest rate that could be offered was 70 percent of the benchmark rate published by the Central Bank.

The move is aimed at increasing internal consumption and employment as companies could potentially have lower funding costs. This reform while not massive it's a first step that could be followed by deposit rate liberalization. Deposit rates are capped at 110 percent of the benchmark rate. There are strong rumours that the deposit rate could be the next reform as China seeks to boost it's slowing growth back to life.

The AUD and NZD were the big winners of the move as demand for their goods could increase with more capital available at a cheaper rate for Chinese companies.

The G20 will certainly discuss China's growth and this going into the weekend will make sure the government is trying to do its part in getting...