The Australian dollar rose after the Reserve Bank of Australia kept interest rates on hold even as it said the strength of the currency was higher than might have been expected.

Glenn Stevens, governor of the central bank, said the downside risks to global growth had lessened over recent months and financial strains in Europe were “considerably reduced”, as he made no change to the 3 per cent base rate.

The Aussie gained 0.5 per cent to $1.0241 against the US dollar and was 0.1 per cent higher against the Japanese yen at Y95.49 after the RBA said there had already been significant easing in Australia over the past year, although it did retain the option of easing further if conditions changed. Australia’s interest rates remain the highest of any nation in the Group of 10 countries.

The US dollar rose against most other main currencies after figures showed the US services sector expanded at its fastest rate in a year in February, adding to hopes of a US economic recovery.

The dollar index clawed back earlier losses after the Institute for Supply Management released its survey results showing a larger than expected rise in the index last month.

The UK pound failed to hold on to gains after figures showed the services sector expanded by more than expected in February. The data initially helped sterling to touch $1.5199 against the dollar, but it was later 0.1 per cent lower on the day at $1.51.

The euro gave up earlier gains after a purchasing managers’ index from Markit showed the eurozone services sector had contracted at a slower rate than expected in February.

The single currency initially rose 0.4 per cent to $1.3075 but was later 0.1 per cent lower at $1.3021.

The yen was stronger as investors continued to take profits on short positions on the currency taken out in recent weeks, with traders seeing few new developments on the horizon until the Bank of Japan’s meeting in April, which will see a more dovish governor at the helm. The dollar hit a session low of Y92.89 but was later just 0.1 per cent weaker at Y93.34.

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