Daily currency report

The US dollar and the Japanese yen ended the week strongly as increased risk aversion continued to draw investors back to perceived safe haven currencies. The recent run of poor economic data releases from all the world's major economies has served to undermine the recent rallies that had primarily benefitted sterling and the euro as well as commodity currencies such as the Australian dollar.

Sterling

Sterling came under pressure, falling close to a one month low against the US dollar largely as a result of the broad revival in risk aversion. Generally soft producer prices in June contributed to the pound's weakness, as data showed that UK factory costs or input prices fell by 11 per cent in June. This was the weakest annual rate since April 1997 and worse than the 8.6 per cent decline in May.

US Dollar

The dollar ended the week relatively strongly, holding close to a one month high against sterling, and also holding its value versus the euro. Risk aversion continues to draw investors back to the greenback as economic data released has failed to paint a convincing picture of a recovering world economy.

Euro

Just as with sterling, the euro came under pressure against the dollar, hurt mostly by the higher level of risk aversion as suggested by weaker global stock markets during the overnight session. Consequently, the single currency received little immediate benefit from data that showed French industrial production surprisingly rise by 2.6 per cent in May.

Japanese Yen

The yen benefitted form increased risk aversion as economic data released in Japan continued to disappoint, prompting safe haven inflows and driving the yen to five-month highs against the US dollar.