Daily currency report

The pound gained against the dollar but weakened against the yen and euro after speculation mounted that the UK government is set to offer companies tax-free repatriation of funds on international profits. The dollar weakened across the board after investors continued to buy currencies in countries that were looking to raise interest rates.

GBP
The British pound is stronger against the US dollar but interestingly enough, weaker against the Japanese yen and euro. The sharp rise in the currency was driven by speculation that the UK Treasury was discussing a proposal to allow UK firms to repatriate some of their international profits tax-free.

USD
The demand for carry trades and yield is showing no signs of abating as traders remained focused on buying the currencies of countries that still plan on raising interest rates. This is why the US dollar has weakened across the board despite a sharp increase in import prices and a strong chain store sales report.

EUR
Just as the market expected, the European Central Bank left interest rates unchanged at 3.75 per cent. If the euro continues to rally it will be very difficult for the ECB to raise rates again.

JPY
The one driving force behind the yen crosses is carry trades and yield. AUD/JPY, EUR/JPY, and CAD are continuing to press higher as the rallies become more and more over extended. The higher the yen goes before the upcoming G7 meeting of finance ministers and central bankers in Washington, the greater the likelihood that the Japanese may not escape being criticised about the currency's weakness.