Commodity currencies boosted by bets on riskier assets

Commodity currencies have been given a boost by an improved appetite for riskier assets as the euro struggles to make gains ahead of a policy meeting at the European Central Bank. The mood has been given a boost by a commitment to bond buying at the US Federal Reserve and the probability that the Bank of England, ECB and Bank of Japan will continue programmes of monetary easing.

This week has seen the Aussie dollar rise from an eight-month low of $1.0116 to $1.0254, and the New Zealand dollar is up to $0.8313 from a trough of $0.8193. Investors appear to be cautious about the euro ahead of any surprises when the BoE and the ECB hold meetings tomorrow.

The single currency has risen slightly to $1.3047, but remained steady against the yen at 121.80. Sterling has also managed to make a small gain to $1.5133. Investor confidence has been boosted by a stronger US economy, which the Fed has said it will continue to support, and a commitment by the Chinese government to introduce record spending.

A two-day meeting at the Bank of Japan is not expected to throw up too many surprises as the government pushes ahead with action aimed at tackling deflation. However, nothing too major is expected until a new governor is appointed at the central bank.

Although growth in Australia is expected to hit 3.0 per cent, traders have warned that disappointment could see the Aussie come under some pressure.

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