Daily currency report

There were no key events in European markets and as a result, US dollar weakness continued to drive currency moves. Singapore adjusted monetary policy and allowed its currency to appreciate. The move signals that central banks are becoming more tolerant of the falling US dollar which was another blow for the greenback. As markets gear up for another round of quantitative easing from the US Federal Reserve to avoid a double-dip US recession, the US dollar fell to more record levels.

Sterling

There was no significant data released from the UK, however, on the back of hawkish comments from Bank of England member, Andrew Sentence; sterling marched towards almost eight-month highs against the broadly weaker US dollar.

US dollar

The US dollar’s slide took the currency’s trade weighted index to 10-month lows. However, various factors allowed the US currency to post a small recovery overnight. Prior to this move, Singapore surprised markets by widening its currency band, thus allowing its currency to appreciate. The Singapore dollar has risen by over 10 per cent against its US counterpart since June. In short, the move shows that emerging market economies are becoming more tolerant of a weaker US dollar which is another blow for the currency.

Euro

With US dollar weakness driving markets, one of the main beneficiaries from its fall has been the euro. The single currency has risen dramatically since September and burst through key psychological levels. There was no significant data from the eurozone but more US dollar selling supported the euro. Given the US currency’s steep fall, investors decided to book profits on this move, and overnight the euro has dipped a little as a result.

Japanese yen

Japanese Finance Minister Yoshihiko Noda warned markets overnight that Japan will continue to take action to curb the yen’s rise regardless of G7 or G20 meetings. Although Mr Noda acknowledged that countries need to work together to address current currency imbalances, he stressed that “it is important to understand each country’s policy efforts first”. Prime Minister Naoto Kan, who endorsed last month’s intervention to weaken the yen, also commented, stating that he is “very concerned” by the yen’s rise. Both warning’s helped the yen fall away from Thursday’s record 15-year high against the US dollar.

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