Daily currency report

Both the euro and sterling spiked higher versus the dollar as markets reacted to comments from US Treasury Secretary Tim Geithner. Norway and Poland cut their interest rates as expected down to two per cent and 3.75 per cent respectively.

Sterling

Sterling's gains were limited as a 40-year Gilt auction and a weak Confederation of British Industry distributive trades survey coming in at -55 were poorly received.

US Dollar

Mr Geithner's comments that he would be "open" to looking into the idea, proposed by the Chinese central bank, to use special Drawing Funds at the International Monetary Fund as a reserve currency sent the dollar into a slump. The dollar slid by as much as 1.3 per cent against the euro in only ten minutes as Mr Geithner's comments were received, however it recouped much of this loss about fifteen minutes later, when he said that the greenback was still the dominant currency in the world.

Euro

The euro is heading for its first monthly gain this year, after the US Central Bank started buying Treasuries. A new record low Economic Research Institute survey released in Germany initially weighed on the euro, but the institute's suggestion that the European Central Bank will cut rates by 100-basis points at its next meeting reversed flows out of the euro.

Japanese Yen

The yen fell as Asian stocks extended a worldwide rally on speculation the worst of the global financial turmoil is over, encouraging investors to seek higher-yielding assets. The Japanese currency weakened against all of the sixteen most active currencies, most notably against the New Zealand dollar and the South Korean won and the yen was pressured further on speculation that reports will show retail sales and business sentiment are deteriorating, reducing demand for the yen being used as a refuge.