Daily currency report

The Australian dollar rallied and helped prop up its commodity-linked counterparts after the Reserve Bank of Australia surprised markets by keeping interest rates unchanged at 4.25 per cent following its monetary policy meeting. The euro steadied and assisted other risky assets after improved eurozone data helped dampen earlier concerns regarding the solvency of the Greek economy. Athens is yet to meet terms set out by its creditors in order to receive its next instalment of financial aid which is a story likely to keep a lid on risk appetite this week. Early safe haven buying helped the US dollar edge higher, however, the Japanese yen failed to keep pace, weighed by more dovish comments from the Bank of Japan. Sterling held steady ahead of this week’s critical Bank of England meeting but could face pressure after weak BRC retail sales data released..

Sterling

Sterling is beginning to look a little shaky ahead of the Bank of England’s monetary policy decision where policymakers could action another round of currency-devaluing asset purchases in order to boost growth. Overnight retail sales data from BRC strengthened the case for more quantitative easing, reporting a 0.3 per cent drop in activity over the year to January.

US dollar

The US dollar firmed broadly against all of its key rivals, supported by safe haven flows on concerns over the solvency of Greece, and last week’s better-than-expected US economic fundamentals. Healthy labour market figures, coupled with upbeat manufacturing and services sector data, has not only doused expectations of more Federal Reserve monetary easing, but fuelled speculation the Fed may revise its timeline for an interest rate hike which is currently set for late-2014.

Euro

The euro slumped to February lows against the safer US dollar as worries persisted about Athens’ fiscal future. Greece is fast running out of time to meet austerity measures set out by its international lenders in order to qualify for more bailout money. However, the single currency did later bounce back on improved economic data.

Japanese yen

The Japanese yen fell sharply against its higher yielding counterparts such as the Australian dollar after comments from the Bank of Japan suggested more growth-supportive policy action is being prepared.

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