Daily currency report

Another batch of weak economic reports from the world’s leading economies heightened global growth fears that ended with a sharp decline in equity markets and an acceleration of risk averse trading. Sterling fell against the US dollar to near one-week lows in response to negative British retail sales. The euro took a tumble after PMI data on the eurozone’s manufacturing and service sectors revealed another month of contraction in March. Furthermore, Europe’s growth-engine, Germany, revealed a worrying drop-off in manufacturing. The news added to disappointing Chinese manufacturing data which was released earlier this week to the detriment of growth and commodity-linked currency units. Subsequently, both the Australian and New Zealand dollars sank to January lows versus the British pound and US dollar. As expected, traders sought safety in the US currency, demand for which advanced after US weekly jobless claims declined to fresh four-year lows. The yen also strengthened, particularly against the euro, not only from safe haven flows but after Japan unexpectedly posted its first trade surplus in five months in February.

Sterling

The pound’s recent surge against the US dollar fizzled quickly after a sharp decline in British retail sales served as a reminder that the Bank of England may still need to flex monetary policy again this year.

US dollar

After giving way to profit taking at the beginning of the week, the US dollar’s recovery strengthened as traders sought safety in the greenback following a string of worrying economic data from Germany, China and the UK. The dollar rose close to one-week highs against a basket of currencies, supported further by another fall in US weekly jobless claims that has strengthened views the North American economy is gaining momentum.

Euro

The euro sank by almost two per cent versus the Japanese yen following economic data showing the eurozone economy shrinking faster than expected.

Japanese yen

The yen is on track to end the week in positive terrain versus its most traded counterparts which has become a rare feat since the Bank of Japan decided to step-up its yen-weakening policies last month. Tumbling stock markets and risk aversion gave the more defensive yen another lift on but the Japanese unit also attracted investors following a somewhat delayed reaction to Wednesday night’s trade data.

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