Daily currency report

The dollar plummeted against the euro as fears over the US economy fuelled expectations that the Fed will cut interest rates next week.

GBP
The sterling remained strong against a weak dollar, but analysts said the pound's upside could be limited as the outlook for further UK interest rate rises looks limited. Britain's 5.75 per cent policy rate has helped make the pound an attractive proposition, however, a severe squeeze across UK markets has bolstered expectations that the BoE will pause its rate raising cycle, and may even drop rates next year to prevent that the UK economy doesn't get like in the US.

USD
The dollar managed to strengthen slightly as investors took profits on its slide and waited to see how far the Fed will cut interest rates at its next meeting, widely expected to drop rates by 0.25 per cent or even by 0.50 per cent from its current level of 5.25 per cent to prevent a deeper economic slowdown and help relieve a money market's squeeze.

EUR
The euro continued to surge against a basket of currencies as recent remarks from European policymakers have suggested future eurozone rate hikes remain on the table. ECB member Victor Constancio stated that the ECB is keeping all options open, and future decisions depend on the duration and economic impact of the market turmoil.

JPY
The resignation by Prime Minister Shinzo Abe doesn't seem to have impacted the yen, as it is weaker against some currencies but stronger against others. Normally, political uncertainty isn't good for the yen, but Mr Abe's weak approval ratings indicate that the public and political parties alike are pleased of the change.

Commercial Foreign Exchange Travelex Malta, freephone: 800 733 22, www.travelex.com/mt/