THE dollar was lower at noon amid concerns tighter lending rules in China could subdue a recovery in the global economy.
At 12:00 (AEDT), the dollar was trading at $US0.9123/28, down 0.4 per cent from yesterday's close of $US0.9161/65.
From 07:00 AEDT, the local unit has traded between $US0.9078 and $US0.9133.
Overnight, China said it would further tighten bank lending, after banking regulator Liu Mingkang said some banks that had failed to meet regulatory requirements had been advised to limit lending and restrict overall growth in credit.
Westpac currency strategist, Jonathan Cavenagh, said growth assets such as equities and the commodity-driven currencies like the dollar had a "pretty poor" overnight session following reports of China curbing its bank lending in January.
Wall Street closed lower, with the Dow Jones Industrial Average down by 1.14 per cent.
Start of sidebar. Skip to end of sidebar.
End of sidebar. Return to start of sidebar.
Australia's benchmark S&P/ASX200 index followed suit, down by 0.39 per cent at 12:00.
"That was really driven by a bit of risk aversion returning to markets, with equities around the world lower," Mr Cavenagh said.
"There are some concerns about the policy tightening measures in China being put in place.
"That put a scare through markets as China is kind of seen as the global growth engine with the US still muddling its way along."
Mr Cavenagh said the dollar was seen as a proxy of China's demand for commodities. China is Australia's largest export market.
The Asian nation accounted for 21.5 per cent ofexports in the five months to November 30, official data showed.
"There is probably not a currency more leveraged into the Chinese growth story than the Aussie dollar," he said.
The currency regained some of its overnight losses during the morning session, Mr Cavenagh said.
"I don't know if this is the beginning of a new up trend," he said.
Mr Cavenagh said financial markets were awaiting the release of economic data from China at 13:00 AEDT.
China is set to release gross domestic product (GDP) data for the 2009 December quarter and retail sales for the month of December.
Financial markets forecast China's economy to have grown by 10.6 per cent in the year to December quarter, 2009, up from an annual rate of 8.9 per cent in the September quarter.
"If that comes out stronger than expected, then Aussie could rally a bit further from here," he said.
Dollar lower at noon3Q income up for Dollar General
