The Australian dollar hit is highest level in almost two weeks after China said it would ease restrictions on investment and the value of its currency.

At 0700 AEDT on Wednesday, the local unit was trading at 94.17 US cents, up from 93.91 cents on Tuesday.

In overnight trade, the Australian currency peaked at 94.48 US cents, its highest level since November 8.

People’s Bank of China (PBOC) governor Zhou Xiaochuan said it would widen the daily range that China allows the renminbi (also called the yuan) to trade in and also would phase out investment caps for foreign and domestic investors.

BK Asset Management MD Boris Schlossberg said the US dollar was sold off after the announcement and the euro and Australian dollar rallied.

“The one unit that clearly benefited from Zhou’s comments was the Aussie dollar, which earlier in the night dropped to a low of 93.50 US cents on the back of the release of the Reserve Bank of Australia minutes,” Schlossberg said.

“Traders responded positively to Zhou’s pronouncements as Australia will likely be one of the prime beneficiaries of China’s capital market liberalisation policies.

“China also clearly wants the yuan to become a competitive medium of exchange with the US dollar and this announcement is just the latest in a series of policy moves to encourage this development in global capital markets.”

On Tuesday, the minutes of the RBA’s November board meeting left the door open to an interest rate cut some time in the new year.

“The news prompted a knee-jerk selloff in the unit, but there was nothing really new in the minutes as most of the comments were made in the RBA statement two weeks prior,” Schlossberg said.

There may be more guidance on future cash rate decisions when RBA assistant governor Guy Debelle takes part in a panel discussion at the Centre for International Finance and Regulation in Sydney on Wednesday.

AAP