The recent cuts to the reserve requirement ratio (RRR) shows that authorities are getting nervous.

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Earlier in the day China announced it is dropping its reserve requirement ratio for banks by 0.5%.

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The announcement came after China indicated it would loosen monetary policy by lowering the reserve requirement ratio for banks.

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Resource shares supported the Sydney market, and the Australian dollar jumped briefly, after China's Xinhua news agency said the People's Bank of China would boost liquidity via its reserve requirement ratio.

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In addition, the People's Bank of China cut its reserve requirement ratio for large banks for the first time since December 2008, following a modest easing for small rural banks last month.

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Expectations of more favorable monetary policies, including two cuts in banks' reserve requirement ratio in the past three months, are creating isolated pockets of optimism, though analysts said Beijing would be quick to put a damper on any signs of a price rebound.

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With the recent cut to the reserve-requirement ratio, China has signaled that they know they have to relax.

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PBOC's reserve-requirement ratio has been raised five times since July 2006.

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This leaves only reductions in the bank reserve-requirement ratio.

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