Daily currency report

Overview

The US dollar is still running in the lead, hitting highs against the sterling and the Japanese yen. Also, Mervyn King, the Governor of the BoE, issued a warning over wage inflation and the possible consequences for interest rates in the UK.

GBP
The sterling fell to its lowest level in two months against the dollar and also weakened against the euro. The weakness in sterling was caused by a wider than expected UK trade deficit for September, which has cast doubts whether a rate hike in November is necessary.

USD
The dollar broadly strengthened for the sixth consecutive session and reached a yearly high against the yen. The dollar was boosted by a growing view that the US economy may not be as weak as initially thought.

EUR
The eurozone has recently experienced strong growth, which has increased inflationary risk and the ECB looks set to raise interest rates at its next meeting. The ECB President has already endorsed market expectation for a quarter-point rate hike by the end of the year to 3.5 per cent.

JPY
The yen briefly touched a 10-month low against the dollar before recovering. Stocks in Tokyo eased as worries that North Korea might conduct a second nuclear test kept investors on edge.

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