Once again currency traders shifted the goalposts as fresh data emerged sending currency values swaying in both directions. After a well-reported excursion into bear territory for the Shanghai stock market earlier in the week, emphasis shifted to rumored measures from the Chinese authorities that would lift bank capital requirements, restricting lending, which is at the heart of a 60% rally for local stocks. That news helped sour appeal for Australian dollar appetite for fear of slower regional growth before the ship turned around on strengthening evidence of Euroland recovery. All of a sudden it's a risk-on day with the conditions promoting euro currency strength.


 The Eurozone story of the day that's lifted the euro to $1.4366 is that German services data and French manufacturing figures for August both portrayed expansion. Both diffusion indices moved from a July reading of 48.1 to above the break even line at 50. Markit Economics survey of German services came in at 54.1 while French manufacturing showed a 50.2 reading. Both readings help dampen earlier discussion of fluke second quarter growth data out of the Eurozone last week.

The Australian dollar is now firmer at 83.90 U.S. cents but not before traders sold it down to 82.29 overnight. The prospects for Chinese bank restrictions by the authorities send shivers down the bulls' spines. Icing the cake somewhat was an independent report from Moody's Investor Services who noted that Australian state and territory revenues were in poor health at a time when spending just keeps on trucking.

Gains for the price of crude oil and a decline in the dollar helped other commodities rally and created a far more appealing backdrop for commodity-related currencies. The Canadian dollar also improved to buy 92.86 U.S. cents.

The improvement in Eurozone conditions provide a useful greeting to central bankers meeting this weekend at an annual conference at Jackson Hole, Wyoming, where Fed chairman, Ben Bernanke opened the session by depicting a U.S. economy where conditions are leveling out. He told fellow bankers to expect a slow-recovery in the face of only modest improvements for labor market conditions.

You can tell it's a bad day for the dollar, with the index down 0.5% at 78.05, by looking at the fortunes of the British pound. Having faced a slew of negative data all week, the pound is joining the feeding frenzy at the expense of the dollar. The pound now buys $1.6578.