Daily Currency Report
Overview
The Japanese yen slumped to a 14-year low against the sterling and held near four-year lows versus the US dollar as investors continued to use the currency to fund purchases of others with a higher return.
GBP
The sterling hit fresh two-year highs against the euro, and also posted gains against the US dollar and Japanese yen as investors continue to favour the high-yield currently on offer. Interest rates stand at 5.25 per cent in the UK, and many traders believe they are set to rise further following this month's surprise increase. Further cementing this view, was property website, Rightmove, reporting that the average UK house price rose by 0.5 per cent in the period from December 3 to January 13.
USD
The US dollar held steady against the euro, but ended the day down against the pound as data revealed that productivity growth slowed to its weakest in more than a decade during 2006.
EUR
The ECB yesterday received a vote of confidence from both Germany and Italy as Angela Merkel and Romano Prodi reiterated that the ECB had done a good job in its interest rate policy, and should remain independent.
JPY
The yen continued its recent slide on Monday, as traders struggled to find any reason to support the currency. Ever since the Bank of Japan left interest rates unchanged at 0.25 per cent last Thursday, traders have questioned the influence of government pressure in the decision.