The Australian dollar is slightly lower amid nervousness about the Chinese banking system.

At 0700 AEDT on Monday, the local unit was trading at 95.88 US cents, down from 96.05 cents on Friday.

The Australian currency started to fall at the end of last week after a report showed there was a significant increase in the amount of bad debt being written off by the Chinese central bank.

There are also concerns that interest rates in China will rise as the central bank reduces the amount of funds available for lending.

Forex.com senior currency strategist Eric Viloria said nervousness about the world’s second largest national economy had seen most currencies fall.

“We saw profit-taking in some of the major US dollar crosses, potentially due to Chinese liquidity fears, as rising interest rates could thwart economic growth in the Asian power house,” he said.

“Most of these moves were fairly mild. More pronounced was the decline in the Australian dollar which fell nearly two per cent from 97.50 US cents to below 96 US cents at the end of the week.

“Since China is Australia’s most important trading partner, rising rates could weigh on the Australian dollar’s asset markets.”

The key economic event this week will be the outcome of the US Federal Reserve’s two-day policy meeting, which finishes on Thursday morning, Australian time.

An announcement is expected to finish its two-day meeting, in which the bank will decide whether or not to begin winding up its $US85 billion-a-month bond purchasing program, designed to stimulate the American economy.

AAP