Markets saw a return to safe haven buying. Riskier currencies such as the euro and Australian dollar came under selling pressure after recently breaching record highs, and demand for the safe haven US dollar and Swiss franc picked up. Sterling found support from a weaker euro, and briefly rose to six-week highs against the US dollar.

Sterling

Sterling remained close to four-month lows against the euro following more weak data on the UK housing market. However renewed concerns on the eurozone’s recovery allowed sterling to firm against the euro. This also helped the currency to briefly reach six-week highs against the US dollar.

US dollar

The US dollar rose against higher yielding rivals such as the euro and Australian dollar. Weak eurozone data and upbeat US figures increased safe haven US dollar buying. Existing home sales for August rose above the expected 4.1 per cent to 7.6 per cent, climbing above recent 13-year lows.

Euro

The euro fell against the US dollar and Swiss franc as worries resurfaced over the health of the eurozone economy. In Portugal there was political tension over an early belt-tightening budget proposal. Ireland’s economy unexpectedly shrank with Q2 GDP falling by 1.2 per cent. Spreads between Irish and German bond yields rose to record highs again as did the cost to insure against Ireland defaulting on debt obligations. This record move in yields came about from increased speculation over the health of the Irish banking system and the possible need for emergency funding.

Japanese yen

The yen weakened against its major rivals after four consecutive days of gains against the US dollar. Speculation is rife that Japanese authorities are preparing themselves for a second wave of yen selling.

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