The dollar continued to rally in Wednesday mid-day trading New York time after Chinese authorities announced ahead of the Asian trading session that banks will slow lending for 2010.

The EUR/USD traded at 1.4287 at 1:00 am in London today, and dropped as much as 100 pips within the next 30 minutes to trade at 1.4187. A drop in the EUR/USD rate means that the dollar strengthened.

The beginning of the rally was roughly an hour after opening of the Asian session, or 8 p.m. in New York. The dollar is continuing its rally into the European and American sessions. The EUR/USD was trading at $1.4101 in mid-day trading.

According to the Associated Press, Chinese banks are expected to trim lending to $1.09 trillion in 2010, down from the $1.39 figure of last year. This announcement came after the People’s Bank of China unexpectedly hiked the reserve requirements for banks by 50 basis points last week. The new reserve requirements took effect on January 18.

Last week, IMF Chief Dominique Strauss-Kahn warned world governments against withdrawing liquidity too soon, although he did state that economies in Asia are leading the recovery.

US stock markets fell today, led by basic materials stocks. The S&P 500 dropped 17.33 points, or 1.51 percent and February crude oil is down $1.86, or 2.35 percent.