Daily currency report

Tuesday’s highlight event, the US Federal Reserve policy meeting, resulted in a more dovish outlook for US monetary policy. This pushed the US dollar to new record lows. The greenback fell to six-week lows against the euro and new two-year lows against the Australian dollar. The US dollar also fell back into intervention territory against the Japanese yen. This triggered further comments from Japanese officials on the yen’s strength. Although with two market holidays in Japan this week, any immediate action remains unlikely. Sterling also managed to recover against the US dollar but fell to nine-week lows against the euro after weak public debt figures highlighted the tough fiscal challenge facing the UK economy. Accelerating this move were a series of successful bond auctions from peripheral eurozone countries such as Ireland and Spain. This helped improve confidence in eurozone sovereign debt. The US dollar’s dismal start to the week was further highlighted as the Swiss franc hit parity and maintaining those highs.

Sterling

Sterling fell overnight to a nine-week low against the euro as a result of more weak UK data. This coupled with growing confidence in the eurozone’s ability to manage its sovereign debt problems.

US dollar

The US Federal Reserve held interest rates at near zero as expected and made no change to current quantitative easing schemes after their September policy meeting. The Fed, in their accompanying statement, confirmed that the US recovery will be modest in the near term, sounded more concerned about weaker inflation and confirmed that they are prepared to provide more stimulus if needed to support the economy.

Euro

The euro broke through key levels against the US dollar as the single currency rose to six-week highs after the US Federal Reserve suggested that US interest rates will remain near zero for some time and further quantitative easing is still a possibility. Successful bond auctions in Greece, Spain and Ireland helped ease sovereign debt worries, giving the single currency a solid platform to trade on going into the Fed’s monetary policy meeting.

Japanese yen

Japanese officials again warned of risks to economic growth posed by the stronger yen. After intervening in currency markets last week for the first time in six years, pressure is mounting for another bout of yen selling after the currency again moved above key levels against the US dollar.

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